Standing Committee A

[Mr. Win Griffiths in the Chair]

Local Government Bill

Win Griffiths: Before we continue our proceedings I have an official announcement to make. Several of the amendments that appear starred on today's Notice Paper appear in the name of the official Opposition, when they were in fact tabled by the Liberal Democrats, who no doubt aspire to that position. The Clerk has sent the appropriate corrections to the printers, but in order that everyone knows precisely who has tabled what, a full blue marshalled list will be produced for tomorrow. I appeal to hon. Members to check that list and to draw the Clerk's attention to any further corrections. We hope that none will be necessary, but one never knows.Clause 8 Control of Credit Arrangements

Clause 8 - Control of Credit Arrangements

Amendment proposed [this day]: No. 33, in 
clause 8, page 4, line 3, leave out 'cost of' and insert 
 'capital value of the assets made available under.'.—[Mr. Hammond.]
 Question again proposed, That the amendment be made.

Win Griffiths: I remind the Committee that with this we are taking the following amendments:
 No. 34, in 
clause 8, page 4, line 5, leave out 'cost of' and insert 
 'capital value of any additional assets made available under the arrangement as a result of'.
 No. 35, in 
clause 8, page 4, line 7, leave out from second 'the' to 'and' in line 8 and insert 
 'capital value of an asset'.

Christopher Leslie: As I recall, I was addressing the remaining issues raised by the hon. Member for Runnymede and Weybridge (Mr. Hammond). He asked whether the word ''cost'', as the term used in clause 8(2), includes the financing costs of the arrangement, and as I said, it will not.
 Accounting practices require assets to be recognised in the balance sheet initially at cost. For an asset acquired under a credit arrangement they will require the cost to be set at a value roughly equal to the amount that would have been paid up front. That may not be the same as the capital value, because the authority may have ownership of the asset only for a limited period, such as a lease. The wording in the clause follows accounting practices and ensures that financing costs are not included in the opening cost figure. The effect is that, in the case of traditional borrowing, interest costs do not score as part of the 
 cost, and in the case of a lease, service costs do not score either. In other words, there is a level playing field, which, I think, is the assurance that the hon. Gentleman sought. 
 What is captured in credit agreements will be basically the same as under the present system, except that it will rely largely on accounting definitions, rather than achieving the same effect through complex statutory definitions, as under the present system. I hope that that explanation is helpful, and I urge the hon. Gentleman to withdraw the amendment.

Philip Hammond: That is exactly what I intend to do. The Under-Secretary has gone some way to reassure me that the Bill, combined with the regulations and the codes of proper accounting practices, will deliver the desired result.
 As I have said in Standing Committees many hundreds of times, and will no doubt say many more hundreds of times, we would always prefer the Bill to be more explicit about such provisions. However, we all agree that it is best, wherever possible, to following standard accounting practices and to have the minimum number of departures from them. My interpretation of the Bill would have given more scope for such departures, but the Under-Secretary reassures me. I shall read his remarks carefully and allow others, who know much more about these matters than I do, to do so too. We want to make sure that we are satisfied, but I beg to ask leave to withdraw the amendment. 
 Amendment, by leave, withdrawn.

Philip Hammond: I beg to move amendment No. 36, in
clause 8, page 4, line 10, leave out subsection (4).

Win Griffiths: With this it will be convenient to discuss the following amendments:
 No. 57, in 
clause 8, page 4, line 11, at end insert— 
 '(5) Before making any regulations under subsection (3) or (4), the Secretary of State must consult the Chartered Institute of Public Finance and Accountancy and the Comptroller and Auditor General.'.
 No. 58, in 
clause 9, page 4, line 32, at end add— 
 '(5) Before making any regulations under subsection (3), the Secretary of State must consult the Chartered Institute of Public Finance and Accountancy and the Comptroller and Auditor General.'.

Philip Hammond: I shall speak briefly to amendment No. 36. Amendments Nos. 57 and 58 stand in the name of the Liberal Democrats, and no doubt the hon. Member for Kingston and Surbiton (Mr. Davey) will say something about them.
 Subsection (4) is the antithesis of freedom and flexibility—we find such subsections in many clauses—saying that after everything else has been settled: 
''The Secretary of State may by regulations impose additional restrictions on the power of a local authority to enter into or vary credit arrangements.''
 A lot of hard work has gone into determining how credit arrangements will be regulated, but at the end of the clause a subsection tells us that the whole thing was a waste of time because, whatever is in the Bill, the Secretary of State retains total and unfettered power to make additional regulations to undo or add to those arrangements. That means that the Government will effectively have the power to steer local authorities, by regulation, between different types of transaction. 
 More insidious than the Government's ability to make regulations or to use the provisions in the Bill is their implied power to exert their will to determine the behaviour of local authorities. There is no transparency in that. At least if the Government make a regulation, we will have the opportunity in this place to discuss it and, to some extent, to scrutinise it, and the world will be aware of it. However, if the Government merely contact local authorities, as they quite properly do all the time in their day-to-day dealings with them, to draw their attention to the fact that something that they propose to do would be frowned upon in Whitehall and that the Secretary of State has the reserve power under subsection (4), they will be able to influence, in a way that is not transparent, the behaviour of bodies that should be publicly accountable. As a matter of general principle, we should prefer such catch-all powers not to be included in a clause such as this. 
 This issue is not merely theoretical; the Under-Secretary has already circulated draft regulation 7, which is to be laid under the powers given in subsection (4). The effect of that regulation is highly controversial and significant because it will exclude public finance initiative contracts from the prohibition on the use of credit for services, which will be dealt with in secondary legislation. Whatever we think about that regulation is not the point; the point is that the power could be used to do something equally significant by secondary legislation, so I should prefer subsection (4) to be removed from the Bill. 
 For some strange reason, it says in my notes that the Liberal Democrats would also like that to happen. It is because they have signed the amendment, which is always a pretty fair indication of support. [Interruption.] As the Minister for Local Government and the Regions observes, perhaps that is not so apparent in the case of the Liberal Democrats. On this occasion, we will take them at face value, and I look forward to hearing what the hon. Member for Kingston and Surbiton has to say about amendments Nos. 57 and 58.

Edward Davey: I signed my name to the amendment tabled by the hon. Gentleman because it is right, as he demonstrated in his remarks. In this Bill and many others the Government legislate in detail, setting out all the powers that they want to give themselves, and we have long, detailed debates about them. Then we get to the end of a clause, a part or the whole Bill, and we find that the Government have a catch-all, get-out clause that enables them to do anything that they want, thus negating all the time and effort that we have spent
 scrutinising the legislation. It is bad practice. Other Governments have done it, but that does not make it right. If the Government want to ensure that the powers that they take are properly scrutinised by a democratic body, they should not allow such catch-all provisions to be inserted into legislation.
 If the Government set out for the Committee why they want the powers, perhaps we can judge them in detail. Then, on Report, rather than have a catch-all subsection, we could put the Government's intentions on the face of the Bill. Perhaps they already have in mind some instances when they would need more regulatory powers for credit arrangements. Let us have those in the Bill; let us not make local authorities second-guess what new regulation the Minister will next come up with. 
 On amendments Nos. 57 and 58, the Government often take the power to regulate, saying that they are not sure how the regulations will turn out. The Bill should place a statutory requirement on the Government to consult other people outside this place. The Chartered Institute of Public Finance and Accountancy is already mentioned in regulations and would be a sensible organisation to consult on the regulations under discussion. We also want to add that the Comptroller and Auditor General must be consulted. 
 This morning, the Minister suggested that our proposal was rather odd and asked why we did not include the Audit Commission, and I can understand why he made that suggestion. I mean no disregard to Sir Andrew Foster and his team at the commission, but the CAG is used to dealing with such definitions with respect to central Government accounting, and is therefore the correct person. If the Minister accepts the principle, but is against the inclusion of the CAG, we will be more than happy for him to table an amendment to ensure consultation with CIPFA and the Audit Commission. That is not the issue of principle for us; the key issue is consultation. 
 My hon. Friend the Member for Southport (Dr. Pugh) wishes to make some additional remarks on the subject, so I will not take any more of the Committee's time save to say that in this clause and clause 9, to which we have tabled amendment No. 58, it is right that the Government should not have unfettered powers and that they should have to consult.

John Pugh: I will speak primarily to amendment No. 58. Hon. Members will already have noted that the Bill contains two catch-all clauses against which amendments Nos. 57 and 58 are directed—clauses 8(4) and 9(3). One allows the Government to vary credit arrangements in whatever way they wish. The other appears to allow them to define capital receipts however they will.
 A cynic might suggest that that is an attempt to put a provision in legislation that will allow the Government to ride roughshod over local authority autonomy and to micromanage local authority affairs. A cynic might suggest that, but the Government will undoubtedly tell us that those are simply necessary provisions included for technical reasons to reserve to the Government powers that may be required to cope 
 with unexpected loopholes, and unanticipated events of the sort that Committee members relish in bringing to their attention. I suppose that the Government could grudgingly say that Opposition Members are expecting two incompatible things—they expect the Government to specify every available loophole, while they seem to be trying to deny the Government any power to manoeuvre should all the loopholes not be anticipated. 
 Amendments Nos. 57 and 58 begrudgingly acknowledge that the Government will have some sort of reserve power and try to ensure that they act for the right reasons in the right way. The amendments do not deny Governments powers outright that they may have to cater for to deal with loopholes that even this Committee cannot dream up. 
 The amendments suggest that there should be consultation between CIPFA and the Comptroller and Auditor General and organisations of such ilk, basically because that would to some extent alloy the paranoia of local government about what the Government's intentions here might be; or rather, not paranoia but justified suspicion and concern on the part of local government, because it has from time to time been sorely abused by central Government and it is being tinkered with all the time. 
 Accepting the involvement of an organisation such as CIPFA, which has the confidence of local authorities and the Government and a grasp of the realities of local authority finance that exceeds that of the National Audit Office and other such bodies, could be a good way to persuade local government to take the leap of faith for which the Minister asks time and again. 
 The Minister's intentions have been clear—he has signalled them from the beginning of the passage of this legislation—and accepting amendments Nos. 57 and 58 will make people think not simply that the Minister has those intentions but that he sincerely believes in them and is prepared to put one or two guarantees down.

Desmond Swayne: I do not think that this will take long. The enormity of what the Government are trying to get away with in this catch-all subsection at the end of the clause is so obvious that it does not take a great deal to expose it. Indeed, I noticed in the past few moments as we have been discussing it that even Labour Committee members, whose noses have hitherto been buried in the Bill and the briefings that they have been receiving from third parties, have begun to perk up and listen to the proceedings.
 Any Bill that this Government propose always contains an Attila the Hun clause. There are several contenders in the Bill and clause 8 is certainly one of them. The Government will be able to do whatever they like and make whatever arrangements they care to. If they think that they are going to get a free run on the clause, the Minister will have to do two things. First, he will have to explain exactly the situations in which the powers will be used and how. Secondly, and more importantly, if he can articulate those situations 
 and the circumstances, he needs to say why he is not able to put them on the face of the Bill but has to reserve the powers in such a catch-all way.

Andrew Turner: I echo the remarks of my hon. Friend the Member for Runnymede and Weybridge (Mr. Hammond). I listened with some care to the remarks of the hon. Members for Kingston and Surbiton and for Stockport—[Interruption.] I apologise; it was the hon. Member for Southport—which is much sunnier than Stockport as it is further from Manchester—who said that the powers would enable the Government to vary capital arrangements in clause 9 and credit arrangements in clause 8 ''however they will''. Of course, they do not; the powers enable the Secretary of State to impose additional restrictions. That is what is so curious about what the Government put forward as a liberalising measure—the Secretary of State will have free range to restrict the freedom of manoeuvre of local authorities.
 In other recent Bills and Acts of Parliament, such as the Education Act 2002—I served on the Committee that considered that legislation—the Government have been much more generous in their interpretation of the word ''liberalising''. In the 2002 Act, they interpreted the word to allow the Secretary of State to vary any enactment—not to impose additional restrictions, but to vary either by the imposition or the reduction of restrictions. It is extraordinary that the definition of ''liberalising'' in Sanctuary buildings seems to be entirely different from the definition that is accepted in the old Admiralty building. I wonder why. What is it about the people who write local government law that makes them even more restrictive than those who write education law? 
 Lest the Committee should misunderstand me, I am not praising the 2000 Act unduly highly, because it gave the Secretary of State powers to restrict schools' freedom of manoeuvre. Even when they wanted the freedom to innovate, the Secretary of State had to say yes or no, but at least he had the opportunity to remove the restrictions imposed by regulation. That is not at all apparent in these measures. 
 I am surprised, but glad, that the hon. Member for Kingston and Surbiton has put his name to amendment No. 36, but I should have thought that he could do better with regard to amendments Nos. 57 and 58. Perhaps he will tell me that the Secretary of State has to consult local authorities over his intention to make such amendments as are provided for here, and that it is not necessary to include that in the Bill. That may be the case, but could not the hon. Gentleman have retained the words ''impose additional restrictions'' while perhaps adding ''or remove existing restrictions'' at the end? That would have been a liberalising measure, but clearly that is too liberal for the Government and too liberal even for the Liberal Democrats.

Edward Davey: The Conservatives did not table anything.

Andrew Turner: The hon. Gentleman forgets that he put his name to the proposal that we tabled, and I very much hope that our amendment goes through.

Paul Goodman: Might I be of assistance to the Minister? If I understand correctly the argument put by my hon. Friend the Member for Runnymede and Weybridge and the hon. Member for Kingston and Surbiton, they are making the case that the clause sets out a series of instructions, which are intended to be fairly precise, regarding credit arrangements, and that subsection (4) is essentially a catch-all measure that uses the vague expression ''additional restrictions''. On the face of it, that appears to be a very broad form of words. I am sure that the hon. Gentleman and my hon. Friend were correct to say that more information on those additional restrictions should be in the Bill.
 Perhaps the Minister will come some way towards reassuring my hon. Friend and the Liberal Democrat spokesman—although, of course, I cannot speak for him—by telling us more about what those additional restrictions might be. What are they? Under what circumstances would they be exercised? What scrutiny might they be open to? So doing might do a little to satisfy me and my hon. Friends, although I remain a little sceptical about that.

Christopher Leslie: Amendment No. 36 would remove clause 8(4), which enables regulations to be made to impose restrictions on the power to enter into credit arrangements. In the draft regulations that we have made available to the Committee—this addresses many points raised by Opposition Members—regulation 7 gives ample indication of how we propose to use the power. Primarily, we want to preserve the prohibition in current legislation on using credit arrangements for purposes other than the acquisition of capital assets. The important point is that credit, like borrowing, should be used to meet capital needs, not to pay for services and running costs. We seek to impose such restrictions through subsection (4).

Philip Hammond: The Minister says that regulation 7 gives an adequate indication of how the Government intend to use the power, but, of course, that power is permissive. We all understand what regulation 7 would do—we have already had a debate on that, so I shall not go into it again—but I presume that he is not offering to limit the Secretary of State's power under subsection (4). The concern being expressed from all parties on this side of the Committee is that the Secretary of State effectively would have unlimited power to do anything, which might be different from what draft regulation 7 intends.

Christopher Leslie: I am not proposing to say that that is the only purpose for which we would use the provision. In the world of accounting, apparently, things change incrementally but fairly regularly. From time to time, it is required that the regulations governing those arrangements should also change. Rather than simply put everything in primary legislation when aspects of accounting need to change, we seek through the simplification process represented by clauses 7 and 8 to use the provision as a means to ensure a certain degree of flexibility in how the rules govern those accounting arrangements. We see our main purpose as prohibiting the use of credit,
 as we would with borrowing, to pay for services and running costs—the consumption of that money.
 The restrictions appear in primary legislation, but it is more appropriate to deal with them in regulations, simply because exemptions may be more flexibly introduced.

John Pugh: The Minister uses the word ''flexibility''. What is the difference between a clause that allows unlimited flexibility and a catch-all clause? Does what he has just said to an extent justify the accusation made about a particular clause—that it is in fact a catch-all? Although he would prefer not to use that term, there is no semantic difference between what he is saying and what we are saying about that particular clause, is there?

Christopher Leslie: I simply draw the hon. Gentleman's attention to the subsection, which is clear about what it intends to do. The main exemption, as the draft regulation shows, will be in relation to private finance initiative contracts, which are hybrid. They provide capital assets and services, and the regulations will ensure that PFI contracts are not inhibited by the restriction on the use of credit arrangements.
 To elaborate on the issues set out in draft regulation 7 and the accompanying commentary, I should say that PFI contracts will not automatically count as credit arrangements under the new system—that will happen only when they score on the authority's balance sheet. If they do, however, the regulation will provide the necessary safeguard. That is the purpose for seeking to foresee how the subsection might be used in such circumstances. 
 Amendments Nos. 57 and 58 would require specific consultation with CIPFA, the Comptroller and Auditor General and the National Audit Office. I believe that they are unnecessary. The Government will, of course, fully consult all relevant bodies as appropriate whenever we make such changes. Indeed, that is one of the reasonable requirements that fall on those in government.

Andrew Turner: Does ''all relevant bodies'' include not only all local authority associations and bodies purporting to represent local authorities, but all local authorities themselves?

Christopher Leslie: It could well do. That is precisely the point that I am highlighting in suggesting that the Committee reject those amendments. To define two particular persons or bodies as a limited list rather than perhaps allow for wider consultation is a topsy-turvy way to consult. There are plenty of provisions throughout the Bill and throughout other legislation relating to where consultations would be appropriate and reasonable. I do not believe that it is necessary in drawing up good statute to specify every single consultee at every single opportunity. For those reasons, I urge the Committee to reject the amendments.

Andrew Turner: The Minister appears to be saying that it is not necessary to specify two consultees, on the ground that that might imply that other consultees or classes of consultee need not be consulted. Yet at the same time he is refusing to say that every local
 authority, for example, shall be consulted. He says that they may be consulted or that it may be appropriate to consult them, but he is not saying that they will be consulted. That leaves a huge gap into which all manner of consultation arrangements may fall, none of which is satisfactory to local authorities.

Christopher Leslie: I understand the sentiments behind the hon. Gentleman's point. We do not know what circumstances may arise, so I cannot say what issues may require in-depth consultation and what may simply require consultation with representative bodies, such as the Local Government Association. That may suffice in certain circumstances. All that I am saying is that it is wrong in principle to specify a definitive list of consultees to the exclusion of others. That sends a message that some consultees are more important than others, which is not good for harmony and good will in the local government community. There are good reasons why such a specifically bureaucratic provision is not required in this clause, and I urge the hon. Member for Runnymede and Weybridge to withdraw his amendment.

Philip Hammond: The Under-Secretary has not addressed the central point, which is that the subsection gives more power, not less, to the Secretary of State. We have seen this trend in Bill after Bill during Standing Committee scrutiny, and unless and until the arrangements for scrutinising and debating regulations are improved, so that the increasing part of our body of law which is dealt with in secondary legislation is properly scrutinised, we will have to go on resisting the Government's inclination to include more and more sweeping regulation-making powers in Bills. I must therefore urge my hon. Friends to vote for the amendment.
 Question put, That the amendment be made:—
The Committee divided: Ayes 9, Noes 14.

Question accordingly negatived. 
 Clause 8, as amended, added to the Bill.

Clause 9 - Capital Receipts

Philip Hammond: I beg to move amendment No. 2, in
clause 9, page 4, line 20, leave out subsection (3).

Win Griffiths: With this it will be convenient to discuss amendment
 No. 37, in 
clause 9, page 4, line 25, after 'provision' insert 
 'in relation to a local authority which is not debt-free at the time of the receipt'.

Philip Hammond: I shall endeavour to be brief so that we can make some progress. Amendment No. 2 would leave out subsection (3), which is the usual nonsense that I have noticed creeping into Bills. First, it makes substantive provisions and then it gives the Secretary of State God-like powers to determine that something that is black will be treated as if it were white, and something that is white will be treated as if it were black.
 I noticed such a provision in the Employment Bill last year, and here I see it again with almost exactly the same structure. Paragraph (a) says that black is white, if the Secretary of State says so, and paragraph (b) says that, on the other hand, white is black, if the Secretary of State says so. Clearly, that is not an acceptable way to proceed, and although Ministers, after some time in office, no doubt start to perceive themselves as having God-like characteristics, reversing definitions is a step too far. 
 I suspect that we have no argument with the use of those powers in draft regulations 9 and 10, but that does not detract from the fact that the Secretary of State will have sweeping powers to define something as being something that it patently and palpably is not. 
 I have a more substantive concern about draft regulation 8, which concerns the treatment of repaid loans and grants. That regulation depends on the assumption, which is clearly fallacious, that all loans and grants are made from borrowed money. On the loans and grants that are to be repaid to an authority, the notes on the regulation say: 
''If it could be used for revenue purposes, the authority would, in effect, be paying its running costs with borrowed money, contrary to the 'golden rule'.
 With a tortuous argument, one could just about propose that interpretation where the original loan or grant had been made from borrowed money, but where that is not so, there is simply no case for what the Government propose in draft regulation 8. 
 I would be grateful if the Under-Secretary could specifically make a case in equity for requiring a local authority that originally made a loan or grant out of its own resources, without borrowing, to treat the repayment as if it were a capital receipt. I invite him to consider how the argument in support of draft regulation 8 is framed in the explanatory notes, which implicitly assume that all such expenditure will originally have been financed by borrowing. 
 Amendment No. 37 is an alternative—proposing, at the very least, to make a change if the Under-Secretary is not prepared to delete subsection (3). It would simply make the subsection inapplicable to debt-free authorities. There is a cogent argument that when an authority is debt-free, it is unnecessary and burdensome for the Secretary of State to have wide powers to treat a receipt as a capital receipt, with all the consequences arising from clauses 10 and 11—joys yet to come. It seems entirely reasonable that debt-free authorities should be excluded from the hazard of the 
 Secretary of State using these sweeping powers to define things as something that they are not, and to include their receipts from the repayment of loans and grants as capital receipts.

Valerie Davey: I rise very briefly because I know that my hon. Friend the Member for Guildford (Sue Doughty) wants to say a little more about the amendments.
 The Liberal Democrats support the two amendments, although it was remiss of me to forget to sign up to them. What the hon. Member for Runnymede and Weybridge has said is exactly right. Subsection (3) seeks to do something rather odd and is one more example of the Government's taking unnecessary regulatory powers to themselves, and amendment No. 37 would free debt-free authorities from some of the controls and powers that the Government seek. I shall not speak at length on amendment No. 37 because in many ways it looks forward to the debates that we shall have on clause 11.

Sue Doughty: On Second Reading, I was concerned that the Minister almost implied that there was something wrong with debt-free authorities; that they were not prudent or sensible, that they did not seem to be using their money in the wisest way, and that the Government knew best. In reality, different types of councils, whether Barking and Dagenham or Stevenage, or my own councils of Guildford and Waverley, each had reasons why they chose to become debt-free. One was that they had no other way of managing their housing finance.
 The Government seem to think that spending power should be redistributed from richer authorities to poorer authorities, yet the need for housing can be as great in a richer authority as in a poorer authority because of the economic nature of the area. Housing in Surrey is hugely expensive, and people pay up to six and a half times their salary to buy a modest house, compared with three and a half in other parts of the country. Such people will not be able to buy their own homes and the cost of rented housing is commensurately higher too. 
 Waverley council submitted a memorandum to the Select Committee. It had to consider the need for affordable housing because its finances could not meet that need. The council's housing need register had more than 1,300 families and single people. Council housing associations had 580 households that needed to transfer to another home because of overcrowding or other reasons, and 400 households were homeless or at risk. 
 Some Labour Members may be surprised that Surrey has homeless people. As in other parts of the country, people become homeless not because they are feckless but because of the cost of living. In 2002, the average house price was about £220,000, and it is now £270,000. Public sector earnings among the lower paid have not gone up to meet those costs and never will. Therefore, in order to use its money in the best possible way, the council decided to focus on becoming debt-free and not to spend on areas 
 outside housing in order to obtain the necessary leverage. 
 In the four years that it took Waverley council to achieve debt-free status, the borrowing forgone was about £4.2 million, yet the benefits of that will be lost if the Government proceed with the Bill. Therefore, we support the amendments. We need a recognition of why local authorities have had to go debt-free and we should trust well-run local government to understand its finances and to manage them appropriately.

Nick Raynsford: We come now to the part of the Bill dealing with capital receipts. There are three clauses, the first two of which relate to definitions and the third of which is the substantive policy. Clause 9, the first definitional clause, starts by stating that a capital receipt is a sum received when an authority disposes of a capital asset. Clause 9(3) enables us to amend that basic definition by regulations to include or exclude specified items. Draft regulations 8 to 11 illustrate how that power would be used. The hon. Member for Runnymede and Weybridge said that he had no objection to the approaches adopted in regulations 9 and 10, but he objected to regulation 8, and asked me to give further explanation of it.
 The explanatory memorandum on regulation 8 makes it perfectly clear that the making of these loans and grants will have counted as capital expenditure for the authority when they were made, so clearly this is capital. If then the authority receives—

Philip Hammond: Will the Minister give way?

Nick Raynsford: I shall give way in a moment. I am trying to answer the point that the hon. Gentleman raised.
 When the authority receives the repayment, possibly from a registered social landlord—one of the most likely circumstances—it is important that it should be treated as a capital receipt. That is both logical and natural. In many cases it will have also been the subject of borrowing, but it is not the fact that it was the subject of borrowing that is fundamental. The sum will have been treated as capital when the loan was originally made, so the receipt of the return is naturally and properly treated as capital. I am sorry if the hon. Gentleman does not agree with that, but perhaps he can now explain why not.

Philip Hammond: Perhaps the Minister can explain why proper accounting practice will not cover the point that he raises. He seems to retreat into saying that this has to be defined as a capital asset because it was capital expenditure when the loan was made. I should have thought that that sat as an asset in normal accounting practice, and on disposal would be treated in the way that the Minister wants. Why is it necessary to have what I call the black and white power of the Secretary of State to define something differently from what it is?

Nick Raynsford: On the contrary, the important thing is to ensure that there is clarity and that there is not scope for those who want to try to wriggle out of
 the obligations to treat the receipt differently and to pretend that it is revenue and use it for such purpose. As we shall discuss in due course—I shall relish this debate—many debt-free authorities raise the banner and say that they want to use their capital receipts for housing purposes, but when one looks at their patterns of expenditure a number of them have not been doing that; they have been using them for other purposes. In practice, they have found attractive the possibility of subsidising other council services, or indeed the council tax, by shifting money away from housing to other purposes.
 If one believes that there is a serious housing problem in many parts of the south-east—I agree wholeheartedly with the hon. Member for Guildford; her area is no exception.

Valerie Davey: Will the Minister give way?

Nick Raynsford: I cannot answer all the points simultaneously. I am speaking about the issue raised by the hon. Lady and I shall give way in a moment. If one believes passionately, as she does, that housing is important and that the money should be concentrated on that, it is right that it should go there. If mechanisms to enable authorities to redefine capital receipts in the way that I have just indicated and apply them to other purposes are allowed, the principle that we need to maximise resources going into housing, which I certainly support, is undermined.

Valerie Davey: I will not stray into the debate that we are likely to have because you would rule me out of order, Mr. Griffiths, but is not the answer to the Minister's point that, rather than going for this pooling regime, for which clause 9 sets the scene, the Government should restrict the use of housing receipts for housing investment? If that is his concern, that is the solution.

Nick Raynsford: As the hon. Gentleman will discover when we get there, that is the effect of what we are doing. We are probably not quite as far apart as he thinks, but we shall come to that later. I shall not test your patience, Mr. Griffiths, by entering into that debate now.
 I was saying that it was right that these sums should be treated as capital and that the Secretary of State should have the power in clause 9(3) to make regulations for these purposes.

Philip Hammond: I go back to the explanatory notes, from which the Minister quoted selectively. If he casts his eye over the last sentence on regulation 8, he will see that it says of the receipt from the repayment of a grant or a loan:
''If it could be used for revenue purposes, the authority would, in effect, be paying its running costs with borrowed money, contrary to the 'golden rule'.''
 That would be the case only if the original capital expenditure on that grant or loan were made out of borrowed money. Does it not give the game away that the Department's thinking is focused on authorities that are in debt and that the circumstances of debt-free authorities are ignored?

Nick Raynsford: Quite the contrary. The hon. Gentleman makes my case for me by highlighting a
 passage—which I would have been perfectly happy to quote, but did not—that illustrates exactly the problem of the risk of leakage of capital from housing investment to other purposes. I made the point that the vast majority of such sums would be the product of borrowing initially, but it is not fundamental that they are the product of borrowing. It is fundamental, however, that the sum was capital when it was made available as a loan to another body, usually a registered social landlord, and it should be treated as capital when the debt is repaid.
 Amendment No. 2 would remove the regulation-making power completely, whereas amendment No. 37 would limit the power by making it impossible for the definition of capital receipts to be used in relation to debt-free authorities. The amendments are clearly designed to make it impossible for the Secretary of State to fine-tune the system to take account of needs and changing circumstances. 
 As I have pointed out, draft regulations 9 and 10 merely continue the existing rules, so I shall say no more about that as both matters are accepted as capital receipts under the current regime. Removing clause 9(3) would also deprive authorities of the flexibility offered by draft regulation 11, which exempts low-value sums from being treated as capital receipts. I cannot imagine that that flexibility is unwelcome to local government, so I hope that Members realise that pressing their amendment would mean trying to remove a useful additional flexibility that the regulations provide. 
 The provisions need to apply to all authorities, whether they are debt free or not. The hon. Member for Guildford suggested that I had implied on Second Reading that there was something wrong with debt-free authorities. I did not. I made the point that there was no justification for treating debt-free authorities on a different basis from other authorities. We believe in a proper and fair system that treats all authorities on a par and does not give particular advantages and benefits to authorities simply because they are in the position of being debt free, for whatever reason. 
 I also made the point that some authorities were debt free because they were fortunate enough to inherit a housing stock—in many cases in new towns built by a new town development corporation—and the Government probably paid the entire debt. Therefore, such authorities had a unique advantage compared to others. Certain authorities may have chosen to be debt free for particular reasons—some because they have not invested to meet needs in their areas that different authorities thought important. 
 All that I was trying to say was that it would be wrong to assume that there was something uniquely virtuous about debt-free authorities. We believe that they should be treated on a par with other authorities and that the system should be a fair one that treats all authorities alike. We do not accept the amendment, and I invite hon. Members to withdraw it. If they do not, I shall invite my hon. Friends to ensure that it is not accepted.

Philip Hammond: I am in some difficulty, because the Minister has not convinced me by any stretch of the
 imagination, but he is right in one thing that he says. Subsection (3) has been used as the vehicle for three perfectly sensible draft regulations—9, 10 and 11—but I would have preferred them to have been enabled via a provision in the Bill that was not so wide ranging and counter-intuitive as subsection (3). The substantive issue behind regulation 8 and the broader issues that we have been debating will be debated again—and, I suspect, once more after that—as we deal with the next couple of clauses, so we shall have plenty of opportunity to show the Government our feelings on these matters.
 Before we move to the next stage of the Bill, perhaps I may consider how we might address the Minister's perfectly proper requirement for regulations 9, 10 and 11 while also addressing our concerns about the broad powers in subsection (3). That is the best way to proceed. I beg to ask leave to withdraw the amendment. 
 Amendment, by leave, withdrawn.
 Question proposed, That the clause stand part of the Bill.

Philip Hammond: I shall be brief, as I have only one issue to raise with the Minister. Subsection (4) would provide or create the possibility of a timing gap between when a receipt is deemed to have been received by the authority and its actual receipt by that authority. There cannot be a person in the Room who is not aware that when we reach clause 11 we shall be considering the great sequestration clause and the Government's attempt to take a large proportion of those receipts. They cannot take what has not been received, however, and my concern is that there is the potential under subsection (4) for a receipt to be deemed to have been received by an authority just because it has become payable to it, even though there may be a substantial timing difference. Thus, the Secretary of State may demand his pound of flesh.
 What is worse, Members will see when they study clause 11 in detail that the question is not even one of a shoot-out between the Secretary of State and the local authority. The Secretary of State will simply be able to withhold other sums payable by him, matching the sums that he will be entitled to receive under the clause. How does the Minister propose to ensure that local authorities are not put in unreasonable difficulty?

Nick Raynsford: I must disappoint the hon. Gentleman by reassuring him that we are discussing perfectly sensible and practical measures rather than what he has described during an extraordinary flight of fancy that produced an apocalyptic vision. He began by saying that Ministers were taking God-like powers, and he described a perfectly sensible provision for making regulations to fine-tune the treatment of capital receipts as a power to make white black. Now we are hearing about shoot-outs. That is all very interesting and dramatic, but it is rather a long way from reality.
 I say to the hon. Gentleman in the nicest possible way that he has been going on for much of our proceedings about the importance of ensuring that 
 proper accounting practice is followed. Proper, modern accounting practice says that capital receipts should be treated as received when they fall due. That is the only reason for introducing the provision—to ensure compatibility with modern accounting procedures. I hope that he does not object to that and agrees that the clause should stand part of the Bill.

Philip Hammond: I accept what the Minister says—that would be the proper way to treat a capital receipt in accounting terms when it fell to be received—but can he give us any comfort by saying that he is prepared to ensure that circumstances do not arise in which an amount payable to the Secretary of State by virtue of clause 11 could fall to be paid over or set off against an amount due from the Secretary of State to the local authority before that authority had received the cash in question?

Nick Raynsford: We do not think that that will happen in practice, because in large transactions involving land and property the receipt normally comes in immediately. However, we shall take the hon. Gentleman's anxiety into account in framing the pooling regime. It is not our intention that an authority should be penalised by being required to make a payment to the Secretary of State before it is in a position to do so. With that reassurance, I hope that the hon. Gentleman will agree that the clause should stand part of the Bill.
 Question put and agreed to. 
 Clause 9 ordered to stand part of the Bill.

Clause 10 - Non-money receipts

Philip Hammond: I beg to move amendment No. 38, in
clause 10, page 5, line 2, at end add— 
 '( )(a) No regulation may be made under this section in respect of a disposal the consideration for which is wholly in the form of housing nomination rights. 
 (b) Regulations under this section in respect of disposals consideration for which consist partly of money payable to the authority or consideration other than housing nomination rights and partly of housing nomination rights may not apply section 9 in respect of that part of the consideration which consists of housing nomination rights.'.
 It is necessary to look at regulation 16 in connection with this. For some reason, the regulations do not run in a chronological sequence through the Bill so regulation 16 is made under the powers given to the Secretary of State in clause 10. The explanatory notes make it clear that the intention of the clause is to provide that where a local authority makes a disposal in kind, it shall be treated as having made a disposal for money, the money being the equivalent value of the consideration in kind. If a disposal is made under value, it will be treated as having been made for money at the full value. 
 That bites most obviously and immediately where local authorities quite properly dispose of land to a registered social landlord at an undervalue and receive in exchange nomination rights in respect of the housing that will be built on that land. If I 
 understand the Bill correctly, such a disposal will give rise to a notional receipt by the authority, which will be subject to the Government's levying regime under clause 11. That seems wholly inappropriate and contrary to Government policy. 
Mr. Raynsford indicated assent.

Philip Hammond: The Minister nods his heads, so that is not what will happen in practice. That is the essence of the concern. It seems sensible to have the reserve power against avoidance by creating non-money receipts to avoid paying the levy. I am an out and out opponent of the levy, but I am also a proponent of the theory that if we are to have law, it must not have any loopholes. Somehow we need to get sales at undervalue of housing land to registered social landlords out of this trap.

Nick Raynsford: After the apocalyptic visions of the previous debate, I can tell the hon. Member that he has put his finger on an extremely important issue that has given us some pause for thought. I hope that I can explain why we are proceeding in this way and why his amendment is neither necessary nor helpful. We entirely agree that there must a reserve power to cover avoidance; otherwise the system simply would not work. We equally recognise that there is currently an important provision that makes it possible for local authorities to pass land at a value well below its market value to registered social landlords in order to enable development to take place and to get the benefit in the form of nomination rights. We have no wish to cut across such sensible arrangements, which are all part of the proper process of ensuring that assets are used to best effect to provide housing for people in need.
 Under the present system, housing nomination rights are exempted by regulations from the set-aside requirement. We have to find a way forward, but the broad exemption proposed by the amendment would not be satisfactory because it could invite attempts at evasion of the pooling rules. The right place for dealing with this is in the regulations where it is possible to target a relaxation more precisely. The regulations do not at present include any provision of this kind. I want to make it clear to the Committee that this is a first draft and that we are looking sympathetically at options involving nomination rights that would continue to encourage good partnerships between local authorities and registered social landlords.

Philip Hammond: It is not just that regulation 16 does not include such a provision, because the explanatory notes on it use the example of housing nomination rights to show how an authority would have to calculate an equivalent monetary value. The notes say:
''For example, an authority might sell vacant HRA land to the private sector in return for rights to nominate tenants to some of the dwellings to be developed on the site. In such a case, the authority must work out what it would have received if the sale had been for cash and apply the pooling percentage to that amount.''
 Until very recently, the Department not only missed the point but specifically intended that housing nomination rights as consideration should be captured. Will the Minister tell us what caused the change and when it occurred?

Nick Raynsford: The Department has rightly been working on two principles. First, authorities should be aware of the value of any land that they pass across and should have an idea of how much they are giving as subsidy. Secondly, we have been keen to ensure that the new regime should not be subverted by arrangements always to seek nomination rights rather than a cash receipt or other consideration in order to evade the provisions of the subsequent clause. That is why the regulation is as currently drafted but, as I told the Committee, we are conscious of potential damage to good partnership arrangements between local authorities and registered social landlords in order to provide affordable housing in areas in which it is most needed.
 We intend to revisit the matter to provide the comfort that the hon. Gentleman wants to ensure that such partnerships may continue while covering ourselves against the risk of evasion. We are not in a position to identify precisely how we will achieve that, but it is our intention. Given that assurance, I hope that the hon. Gentleman will withdraw the amendment.

Robert Syms: I have a worry. I served on North Wiltshire district council and Wiltshire county council for several years. There are times, especially in rural areas, when it is extremely difficult to provide local services. In such circumstances, it is not unusual for parish, district and county councils to put resources together to make such a provision.
 The county council owned bits of land that it sometimes put into a deal, although not for a receipt but for the provision of a local service that it deemed to be a good thing for the local community. I would be worried about the value of such land that the Government would presume. 
 If there are no unitary authorities, it is sensible for tiers of local government to work together, which is sometimes the only way for provision to be made, given authorities' sparse resources. A community centre or a leisure centre could be provided by a town or district council because of the gift or sale of land at a reduced rate by a county council that had county farms or a bit of land at the edge of a school. I hope that the Minister appreciates our worries that the Government's possible intervention might make it more difficult for authorities to be creative when making provision for the people whom all authorities are trying to serve, albeit at various tiers.

Nick Raynsford: I shall resume a speech that was otherwise rapidly reaching its end. I agree wholeheartedly that it is right to encourage creative relationships among different tiers of government and voluntary organisations for the provision of housing. We do not intend to cut across that. As the hon. Member for Runnymede and Weybridge said, there is a need to balance that against a loophole that would make the capital receipts pooling arrangement non-viable. I am committed to exploring ways of trying to deal with that problem in a way that does not cut across good, sensible partnership arrangements that deliver affordable housing where it is needed through the kind of arrangement that the hon. Member for Poole (Mr. Syms) described.

Philip Hammond: My hon. Friend the Member for Poole has raised an important point. I was looking at the narrow point about transfers to registered social landlords and thinking specifically about housing. My hon. Friend's point was about the wider issue, which, if we defined it, would be the use by a local authority of an asset that it holds for its own purposes, but which would be injected into some other partnership. If the Minister is to resolve this problem, he must find a way for such a transaction not to be treated as a disposal. Perhaps the answer would be for the local authority to grant long leases at nominal rents and premiums, or something along those lines. That issue must be resolved.
 I was concerned to hear the Minister use the word ''evasion'' in what turned out to be the false closing of his speech. He talked about wanting to make sure that whatever method he put in place to ensure that the arrangements whereby local authorities dispose of land in exchange for housing nomination rights, it would not be used as a vehicle for the evasion of capital receipts pooling. 
 The term ''pooling regime'' is bizarre; there is nothing in the Bill about it. In fact, it is a levy by the Secretary of State on local authorities. There is, however, no reference to pooling anywhere. I wonder whether the Minister's words are carefully chosen and whether he intended to imply that some level of disposals for housing nomination rights would be acceptable. The example that he gave, however, referred to a local authority's always disposing of its assets for nomination rights, rather than for cash, and he described that as evasion. [Interruption.] I think that if he reads the record he will find that he did. That description implies that there will be a quantitative limit on the ability of local authorities to carry out such transactions. 
 I take what the Minister said as I think it was intended—as a genuine recognition that regulation 16 as it is drafted is not right and that the power under clause 10 must be used differently. It would be appropriate to withdraw the amendment, but will the Minister assure the Committee that before Report he will come back with a revised draft regulation? It would not be satisfactory if we left a bad, sweeping power in clause 10. That would be an example of precisely the thing about which we are concerned—a badly drafted regulation has been recognised in a ministerial assertion, but there is no remedy in sight. We would, in any case, need to have a substantive debate about that issue some months down the line after a new regulation is drafted. I hope that the Minister will be able to reassure the Committee.

Nick Raynsford: I cannot give the hon. Gentleman an absolute guarantee that we will be able to produce revised regulations in time for Report stage, but that is only because of the considerable number of other pressures under which we are working. I undertake to write to the hon. Gentleman, setting out our thoughts on how we might address this conundrum and I will copy that letter to all Committee members. I hope that the hon. Gentleman will accept that as an indication of our good faith.

Philip Hammond: I am grateful to the Minister, but the key thing is that having flagged up our concern, which the Minister has effectively acknowledged is legitimate in the context of the regulation as it is drafted, we need to see how the Government intend to use the power before the parliamentary passage of the Bill has finished. If that cannot be done before Report Stage, it should be done before the Bill is considered in the other place, so that we have the opportunity to debate it during the parliamentary progress of the Bill, rather than during a debate on a statutory instrument.

Valerie Davey: I have been listening closely to the hon. Gentleman's remarks. He has done the Committee a great service by bringing the matters to the Minister's attention. The Minister has responded positively.
 With respect to overall housing policy, much of which is contained elsewhere in the Bill, the Government are effectively giving large subsidies to councils that are transferring their stock to registered social landlords. It appears that the Government were going the other way. 
 Is the hon. Member for Runnymede and Weybridge concerned, as I am, that there may be a lack of consistency in the policy? When the Government draft the regulations, about which he teased out information, they should bear that in mind and ensure that authorities that seek to promote registered social housing in that way are not disadvantaged but, if anything, encouraged.

Philip Hammond: The hon. Gentleman is right. In fairness to the Minister, he has implicitly recognised that draft regulation 16 cuts across the intention of Government policy. For that reason, he has indicated that he will consider redrafting it. I beg to ask leave to withdraw the amendment.
 Amendment, by leave, withdrawn. 
 Question proposed, That the clause stand part of the Bill.

Philip Hammond: I have a very quick question, which is less important but not entirely redundant as a result of what the Minister said. Would the Minister clarify whether the powers under clause 10 can be used retrospectively—I know that that is an emotive term—to catch disposals and non-monetary receipts for which a local authority had contracted prior to the legislation coming into force? I see that all the members of the Minister's support services have carefully averted their eyes. If he cannot get the answer that he needs at this moment, perhaps he would be kind enough to write to me.

Nick Raynsford: The hon. Gentleman asks a good question. Let me say right away that it is not our intention that the provision should have retrospective effect, as I shall make clear in the debate on the next clause. On the specific issue as to whether, technically, there might be a problem, I shall seek further advice and write to the hon. Gentleman.

Robert Syms: I have just one further small point. Sometimes, when a county council decides that it has a surplus school in a village, it is not entirely clear who actually owns it. Many schools were set up by local
 charities that may have predated the county council or were provided by local landowners, so there is often endless debate as to what can be done with an asset or whether it is legitimate for the county council to sell it. I hope that the Minister takes that into account before he drafts the policy.

Nick Raynsford: I remind the hon. Gentleman that county councils are not housing authorities. It is unlikely that they would have an asset of that nature that could be treated as a housing capital receipt and, therefore, the provisions are not likely to apply.
 Question put and agreed to. 
 Clause 10 ordered to stand part of the Bill.

Clause 11 - Use of capital receipts

Philip Hammond: I beg to move amendment No. 66, in
clause 11, page 5, line 4, at beginning insert 
 'Subject as provided in subsection (2)'.

Win Griffiths: With this it will be convenient to discuss the following amendments:
 No. 59, in 
clause 11, page 5, line 4, leave out from 'State' to end of line 5 and insert 
 'shall not in any circumstances interfere in the use of capital receipts by local authorities.'.
 No. 69, in 
clause 11, page 5, line 4, after 'use' insert 'by a local authority'.
 No. 70, in 
clause 11, page 5, line 5, leave out 'a' and insert 'that'.
 No. 60, in 
clause 11, page 5, line 6, leave out subsection (2).
 No. 61, in 
clause 11, page 5, line 6, leave out from beginning to end of line 22.
 No. 67, in 
clause 11, page 5, line 6, leave out 'in particular'.
 No. 51, in 
clause 11, page 5, line 7, leave out from beginning to end of line 10.
 No. 62, in 
clause 11, page 5, line 11, leave out from beginning to end of line 12.
 No. 3, in 
clause 11, page 5, line 11, leave out from 'requiring' to 'of' and insert
'such amount as the Secretary of State shall specify, being not more than 20 per cent.'.
 No. 40, in 
clause 11, page 5, line 12, at end insert— 
 '(c) make provision requiring an amount not exceeding sixty per cent. of a capital receipt to be used only to meet capital expenditure in connection with the local authority's functions under part II of the Housing Act 1985 (provision of housing).'.
 No. 63, in 
clause 11, page 5, line 12, at end insert—
'(2A) Regulations made under subsection (2)(b) may only include the following in relation to payments to the Secretary of State— 
 (a) in relation to the disposal of dwellings, the maximum amount that can be specified is 25 per cent. of the capital receipt; and 
 (b) in relation to the disposal of any other asset, the maximum amount that can be specified is 15 per cent. of the capital receipt.'.
 No. 39, in 
clause 11, page 5, line 14, after '2(b)', insert 'and 2(c)'.
 No. 25, in 
clause 11, page 5, line 15, after 'of', insert 'an interest in'.
 No. 41, in 
clause 11, page 5, line 20, leave out subsection (5).

Philip Hammond: This is one of the most important clauses in the Bill. The large number of amendments that have been tabled bear witness to the intensity of interest in it. They have all been grouped together, which is perhaps inevitable if a clause is relatively short and has a focused purpose.
 I think of this clause as the expropriation clause. It drives a coach and horses through the Government's claim that the Bill is about giving freedoms to local authorities. The Transport, Local Government and the Regions Committee said clearly that it should be deleted from the Bill. It is another piece of the Government's plan to siphon off resources from good, prudent councils and hand them to Labour-controlled councils, including the odd basket case. 
 The power in subsection (2)(a) allows the Secretary of State to direct the use of non-housing receipts for purposes of either capital expenditure or debt reduction. Draft regulation 17 is permissive in that it allows either. Would the Minister confirm that the intention is that the Secretary of State should be able to specify by regulations to either subsection (2)(a)(i) or subsection (2)(a)(ii) and that it is merely an expression of his current generosity of mind that the draft regulation allows either debt reduction or capital expenditure? 
 The power in subsection (2)(b) is the power to sequester housing receipts from local authorities. In the terminology of the guff that the Government put out and Ministers repeat at the Dispatch Box, that is called redistribution. There is nothing in the Bill about redistribution. It mentions an amount equal to a part or a whole of a receipt being payable to the Secretary of State. That is sequestration by any other name. The redistribution will be entirely at the discretion of the Secretary of State at a later stage. The Minister might like to comment on a report that the Minister for Housing and Planning said—outside of Parliament—that of the 34 debt-free authorities that make up the capital receipts group, only one, Barking and Dagenham, is an authority likely to be considered to be in housing need by the Government. There is likely to be a wholesale redistribution away from that group of authorities to another, more favoured, group. 
 I shall spell out how I understand that the provision will work. The Minister will have the pleasure of correcting me if I am wrong in saying that 75 per cent. of right-to-buy receipts will be sequestered by the Secretary of State. Of other housing receipts, including large-scale voluntary transfer receipts, 75 per cent. will be sequestered after taking into account certain allowances that give local authorities an opportunity to reinvest part of the proceeds in housing and urban 
 regeneration before the Secretary of State takes his cut. If that scenario is right, I cannot square it with the comments that the Minister made in the last debate, when he told the hon. Member for Kingston and Surbiton that when we came to this debate we would see that clause 11 would not remove the funding that local authorities might wish to reinvest in housing within their areas. If the source of that funding is right-to-buy receipts, the proposal, together with the draft regulations, would remove 75 per cent. of it from the authority and give it to the Secretary of State to be used in his absolute discretion. 
 Some of the amendments are alternatives to each other, and some seek to probe the Government's reasoning behind the drafting. Our initial reaction is to oppose the provisions of the clause, especially subsection (2)(b). However, we are realists and, in order to move forward, we think that it is worth exploring what the Government are trying to achieve and what their objections to the present system are, in order to establish whether there is any scope for compromise. Unless the Minister demonstrates a willingness to alter his position, we shall vote against the clause on stand part, because the suggestion that the Secretary of State can take one community's assets and move them elsewhere in the country is wrong in principle. Money raised from the sale of council houses should stay in the community and be spent according to locally determined priorities for housing and urban regeneration. 
 The Opposition do not accept the argument that borrowing, supported by central Government, has necessarily funded the provision and upkeep of authorities' housing stock. Some authorities have received negative housing subsidy for decades, and all authorities, whether they originally received housing subsidy or not, will have invested substantial amounts of their own tenants' money and, in some cases, council tax or, before that, ratepayers' money in that housing stock. The proceeds of sale of those housing assets should be reinvested locally and should not become part of a national resource, to be directed around the country on the Secretary of State's whim.

Brian Iddon: In affluent areas such as the south and south-east, where the Government in the past have invested in housing and the price of housing has gone up to what I consider, from a northern perspective, to be astronomical levels, is it not fair that the Government should have a share in that extra money to reinvest in housing in other parts of the country where there is greater need?

Philip Hammond: No. If the hon. Gentleman thinks it through, he will realise that, if the values of housing units have gone up, that gives rise to precisely the problem that hon. Members representing those high-pressure areas of the country face every day. Fire fighters, to take a topical case, teachers or social workers, who are effectively paid on national salary scales, do not stand a chance of being able to buy a property. Therefore, people in other parts of the country that do not suffer the same house price pressures who could expect to get on the housing
 ladder and buy a property are forced to look to the social housing sector. The need for additional social housing goes much further up the income scale in parts of the south-east that are suffering from high house-price pressures than in other parts of the country. There is a real need in such areas to ensure not simply that people are decently housed, but, increasingly, that the public services, which the Government talk about and talk about, can be delivered.
 I assure the hon. Gentleman that if he comes to Surrey, or even to the constituency of the hon. Member for Kingston and Surbiton, he will find that it is increasingly difficult, if not impossible, to recruit the appropriate people to staff those services, because they cannot afford to live in the area if they have to buy market housing.

Brian Iddon: I am following the hon. Gentleman's argument with interest and I have sympathy with some of the things that he is saying, but can he say, hand on heart, that all the money being caught by local authorities from right-to-buy sales and other capital sales is being reinvested in housing and not in other areas of local authority expenditure?

Philip Hammond: I cannot, and I know that this will be one of the main thrusts of the Minister's argument—his trump card. I want to go a little deeper into the issue.
 First, it is right that local communities that have contributed to the value of the housing asset over the years should be able to decide how the receipts will be spent. In most cases the historical investment will be a small part of the total investment over the life of the asset, most of which will have been contributed by tenants or local council tax payers. However, let me address head on the performance of some authorities in reinvesting their receipts in housing. 
 I intended to come to this question later, but I shall put it to the Minister now. Has he analysed properly and rigorously the extent to which the total cost indicators imposed by the Government constrain housing authorities in high, cost-pressure parts of the country from reinvesting in affordable housing? I do not claim to be an expert on the subject, but it seems to me that, because of the high pressures of land costs, it is difficult for local authorities in certain areas to reinvest in affordable housing, unless they are doing so off the back of planning obligations that will effectively allow them to access land at less than market rates. I wonder whether the Minister has taken full cognisance of the fact that that will be a constraint on the activities of local authorities that receive capital and cannot reinvest in affordable housing as much as they wish. 
 Although the power given to the Secretary of State under the Bill would apply to all authorities, it will have a disproportionate impact on those that are debt-free. That is because the current regime—I recall it well, as early in the previous Parliament I sat on the Committee in which the Minister introduced the regime for set-aside—requires 75 per cent. of receipts from the sale of council houses to be set aside, but debt-free authorities have complete freedom over how 
 they use capital receipts. Clearly, the shock to the system will be considerable for debt-free authorities and negligible or non-existent for indebted authorities. The latter will simply find that the 75 per cent. ceases to be a notional entry in their accounts and goes off as tax paid to the Secretary of State. The disproportionate way in which the measure will affect debt-free authorities is an important point to be considered. 
 The amendments are designed to probe the Government on key questions, and to determine whether the Government are motivated by the claimed failure of local authorities to invest in housing, as the Minister said on Second Reading, and, if so, what role cost constraints play in that failure to reinvest; or whether the Government are simply determined to get their hands on the money and use it for their purposes and to suit the geographical priorities determined by the Secretary of State. In relation to the former, our amendments include suggestions that will adequately address the Government's concern about ensuring that the receipts are recycled into housing in the local areas concerned. However, there may have to be adjustments to the cost control regime to achieve that. 
 There is a special question that relates to new towns, which the Minister mentioned earlier, but I think that that issue is almost exclusively Labour party grief. I do not think that any members of the Committee represent new towns; at least, if there are, they have not been vocal in putting the case for new towns. If I am wrong, I look forward to hearing from them in the near future. The Minister's point about the transfer of assets in relation to new towns completely ignores the fact that those so-called assets, often system-built housing that is now 30 or 35 years old, have been accruing vast maintenance liabilities throughout their life. They will require substantial investment, both in relation to housing units and supporting infrastructure, if their lives are to be extended long into this century. 
 I shall talk about the substantive amendments, and will not bother making reference to those that are simply consequential or paving amendments. Amendments Nos. 69 and 70 would amend subsection (1) to assert the Secretary of State's power to regulate the use of capital receipts, and to make it clear that it is a power to regulate the use of capital receipts by the authority receiving them—in other words, excluding the possibility of removing those receipts from the authority, in line with the compromise approach that we seek. There would be a constraint on the use of receipts, but the receipt would remain with the receiving authority. 
 Let me deal with the Liberal Democrat amendments Nos. 59 to 61. It was clever of the hon. Member for Kingston and Surbiton to table separate amendments whose aggregate effect would be to prevent clause 11 from standing part of the Bill. A clause that ended up saying that the Secretary of State 
''shall not . . . interfere in the use of capital receipts by local authorities''
 would probably not be worth including. It might have been more honest of the hon. Gentleman not to table 
 the amendments but to speak against the clause in the stand part debate. Taken together, the amendments are a resounding no to clause 11. 
 Amendment No. 67 is a slightly technical probing amendment. It would leave out the words ''in particular'' in subsection (2), which states: 
''Regulations under subsection (1) may, in particular . . . make provision requiring an amount equal to the whole or any part of a capital receipt to be used only to meet . . . capital expenditure, or . . . debts or other liabilities . . . make provision requiring an amount equal to the whole or any part of a capital receipt to be paid to the Secretary of State.''
 In other words, subsection (2) sets out two particular uses of the regulation-making power under subsection (1). 
 It is not clear to me, as a non-lawyer, whether the phrase ''in particular'' narrows the scope of subsection (1), or merely gives examples of the uses to which the regulation-making power under that subsection might be put. Will the Minister clarify whether the phrase ''in particular'' limits the power to only those matters described in subsection (2)(a) and (b)? 
 Amendment No. 62 is the meat and drink of the debate. It would leave out subsection (2)(b), which gives the Secretary of State the power to require that 
''an amount equal to the whole or any part of a capital receipt . . . be paid to the Secretary of State.''
 We know that the Secretary of State intends to use that power to require 75 per cent. of right-to-buy receipts and 50 per cent. of other receipts to be paid to him as a tax.

Jon Cruddas: Has the hon. Gentleman any estimate of the prospective redistribution that the Government's proposal will amount to? At the moment, we lack figures; we have no estimates of the scale of the redistribution.

Philip Hammond: The Minister is probably in a better position than I am to give such figures—he nods knowingly—but it is probably relevant to consider only the 34 debt-free authorities, because the other authorities would be in the same position anyway. We are talking about some £100 million per annum in respect of the 34 debt-free authorities, including Barking and Dagenham, which is by far the largest. Its figure would be about £12 million per annum.
 To put that in context, the national figure for all authorities would be about £1.6 billion per annum, so we are talking about a small proportion of the total. With regard to meeting national housing need, it is a relatively insignificant sum, especially if one considers that part of it will presumably be recycled to the authorities that pay the tax, certainly to Barking and Dagenham. However, it is a very significant sum for individual authorities, many of which are quite small. The hon. Member for Guildford spoke about Waverley, which is a small authority. My local authority, Runnymede, is debt-free and a very small authority.

Nick Raynsford: For the sake of clarity, I should point out that our figures show that, if all the amendments were accepted, they would reduce the amount of money available for redistribution to spend on housing nationally by more than £1 billion a year.
 Even if we were to limit it to those that are simply restricting the amounts that can be pooled, that would result in a reduction of more than £800 million, and merely exempting debt-free authorities would still cost some £120 million. Those are substantial sums of money, which would have a dramatic effect on the overall housing programme.

Philip Hammond: The relevant figure is the last one that the Minister quoted—the £120 million. To discuss any other figure is to confuse the issue, given that local authorities are required to set aside—[Interruption.] It is my amendment, and, if the Minister does not mind, I will say that I am fairly pleased with my off-the-cuff estimate of £100 million, if the Minister's own departmental resources have come up with £120 million. I believe that that figure is within an acceptable margin of estimating error, given that I am on the hoof in a Standing Committee.

Valerie Davey: The Minister gave us some interesting figures, and suggests that the money would not be available for housing investment. Does the hon. Gentleman understand that to mean, as I do, that the money could still be used for housing investment, but that it would be up to the local authorities that were selling those assets to decide how they wanted to invest them?

Philip Hammond: Yes. In tabling the amendments I have deliberately sought to suggest ways of reaching a compromise on that matter. This is not just a party political debate. The Minister will be aware that some of his Labour colleagues who supported the capital receipts group are concerned about the matter. They hope that it will be possible to find a compromise that will delight no one but that everyone will be able to tolerate.
 It has generally been accepted by Labour Members to whom I have spoken that the most likely form of compromise acceptable to the authorities concerned, and that might also appeal to the Minister, would be to ring-fence a proportion of those receipts for housing use within the authorities that had received them. In a spirit of compromise, our amendment No. 40 seeks to do precisely that. However, on the basis of the interventions that the Minister has made so far, I am not optimistic that he will seek a compromise—although I hope that I shall be proved wrong.

Desmond Swayne: It is his birthday.

Philip Hammond: As my hon. Friend reminds me, it is the Minister's birthday. That may turn out to be a happy coincidence of timing for the many people in local authority areas in the south-east who are in work and in relatively well paid jobs, but who are unable to get themselves on to the housing ladder with the housing market as it is at present. Those people desperately need to see more resources invested in affordable housing in their areas.
 The Liberal Democrats have indicated their support for amendment No. 62, which would delete subsection (2)(b), and we will want to vote on that amendment. If there was any equity in the world, and if the results of votes in this place depended on the 
 force of the arguments, we would be confident of winning that vote. However, since there is not much equity in the world, and certainly not in the way in which this place works, and since it will be apparent to anyone with only a passing acquaintance of this place that the outcome of votes has nothing to do with the validity of the arguments put in favour or against, we have sought to find a compromise. That is the point that we have reached in tabling amendments Nos. 3 and 40, as the hon. Gentleman helpfully suggested. 
 Amendment No. 3 would limit the amount of tax for national redistribution that the Secretary of State could levy under subsection (2)(b) to 20 per cent. 
 It is a big concession in principle to suggest that the Secretary of State should have any right to sequester those receipts. Leaving aside our attempt at a practical compromise, let us consider the Minister's argument logically. He said that many of the housing assets were originally financed by central grant or by borrowing supported by central funding. There is a grain of truth in that in some cases, but not all. It may be equitable for some sort of a levy on housing receipts, which goes back to the central pot in recognition of the original seed corn that was invested. The Minister's Department is in a better position than I am to make detailed estimates, but even the most superficial analysis shows that the huge ongoing investment over many decades in much of the council housing stock has been a charge on rent payers, local ratepayers and council tax payers. 
 The measure is not about redistribution and pooling between authorities, but about the Treasury taking a levy. Nothing in the Bill guarantees that that levy will be recycled into expenditure on housing that would not otherwise have been made. The Treasury will spend the funds on housing that it would have to have funded anyway because of pressures in the system. 
 Amendment No. 40 would set aside a further 60 per cent. of the capital receipt—after the 20 per cent. taken by the Secretary of State—for housing reinvestment within the recipient authority area. That is a big compromise on the principle that local authorities and communities should decide how to spend the receipts, but it is our attempt at a compromise or consensus to which the Government can agree. It is far from giving the freedom and flexibility that the Government talk about in connection with the Bill, but it is a less bad outcome if the national levy is 20 per cent., 60 per cent. is ring-fenced for housing in the recipient authority and 20 per cent. is a free capital receipt for debt-free authorities to spend as they wish. 
 I have already raised the issue of total cost indicators and their constraints on recipient authorities in spending the 60 per cent. I hope that the Minister will address the matter in due course. 
 A similar effect to that of the amendments could be achieved by changing the regulations, extending them to allowances that local authorities can set against a receipt before they calculate the levy payable to the Secretary of State. Thus, spending on affordable housing and urban regeneration could be set against 
 right-to-buy receipts before calculating the Secretary of State's take. I suspect that if the Minister is in a mood to compromise, it will be on the regulations rather than on the Bill. Conservative Members will listen carefully to him if he is inclined to take that route. Although we would prefer the changes to be in the Bill, we could live with changes to the regulations if they are on the same lines. That would be a sensible compromise. 
 I hope that the Government will not blindly pursue their two principal targets: first, debt-free authorities, who will have their freedom of the past five years in respect of their capital receipts dramatically removed—from a bureaucratic point of view, that might be seen as order and sanity restored with Whitehall triumphant and in control of how the capital receipts are spent—and, secondly, the right to buy. 
 We have already seen that the Deputy Prime Minister is gunning for the right to buy. His behaviour is based on the wholly fallacious assertion that the right to buy reduces the availability of affordable housing to rent. The right to buy does not have that effect—indeed, if receipts are properly recycled the right to buy can increase the availability of affordable housing to rent. Although it reduces the total stock, the stock is irrelevant: what matters to people in need of housing is their chance of getting a house. Having a huge stock of houses occupied in perpetuity by people who may no longer be in need—they may be in very much less need than some people on housing waiting lists—or on particularly low incomes is not an effective or efficient system. However, the Government persist in continually reasserting the fallacy. I will not go further down that route now, but we may have an opportunity later to discuss the ins and outs of housing finance and how expanding the right to buy will increase the number of available lettings of affordable houses, which is what we all want to achieve. 
 Finally, amendment No. 63, tabled by the Liberal Democrats, is essentially a variant on amendment No. 3, but the principle is the same. The amendment offers a compromise percentage figure restricting the Secretary of State's powers under subsection (2)(b). I am sure that the hon. Member for Kingston and Surbiton would agree that that is an imperfect solution, but it is better than the Government's proposal. 
 Amendment No. 41 is different and stands distinct from the other amendments in the group. It would delete subsection (5), which states that the Secretary of State may set off any amounts receivable by him under clause 11 against any amounts payable by him to a local authority. That seems a rather Big Brother approach. In the real world, people do not have statutorily enshrined set-off powers. Many commercial contracts, and certainly property-related contracts and transactions, which is what we are talking about, specifically exclude a power of set-off. Yet the Government, who have been spouting repeatedly—in the circumstances, I had better not say, ''at some length''—about the need to mirror ordinary accounting practice and, by implication, standard 
 practices in the commercial world, would give themselves this power of set-off. 
 I have already voiced one concern about that in relation to clause 10, namely, that there may be deemed to be receipts that have not actually been received in cash, but which the Secretary of State—not through malice, but just because there is a machine running somewhere—will automatically set off against payments due to be made to the local authority. Subsection (5) should be removed and the Government should not seek a specific statutory provision to deal with the way in which debtors and creditors behave towards each other in relation to the making and timing of payments. That is wholly unnecessary and goes against the grain of the Minister's suggestion that the new regime will mimic the real world as far as reasonably possible.

Valerie Davey: I shall not detain the Committee for too long, for the simple reason that the hon. Member for Runnymede and Weybridge made a very long speech, I agreed with much of it, and I support many of his amendments, just as he supports many of the Liberal Democrat amendments. Furthermore, my hon. Friend the Member for Guildford wants to catch your eye, Mr. Griffiths, and the Minister is itching to reply to the debate—I know that because he has a ''Focus'' leaflet in his folder. It is always reassuring to know that he is about to quote some Liberal Democrat wisdom, but perhaps I can set out the party's official position first.
 The background to the clause is that the Government still do not trust local authorities and do not want to give them any freedom. The Bill proposes the prudential capital regime, which is a good thing and a step in the right direction. However, in introducing it the Government saw that some controls over capital receipts would have to be relaxed—those controls could not be implemented in the same old way, because that might give local authorities more freedom over how they used their capital receipts. The Government could not have that, so they had to invent a new mechanism for clawing back and redistributing the money. Indeed, as the hon. Member for Runnymede and Weybridge said, they have gone further by introducing an extra levy on debt-free authorities. So, when we hear the Government's rhetoric about how the Bill frees local authorities, let us remember that the clause imposes some very big restrictions as well as an extra punitive levy on authorities that manage their finances well. 
 The hon. Gentleman put his finger on it when he talked about the Treasury, which is, of course, behind that measure. It cannot stand the idea that some public sector body somewhere will have some money because it managed its affairs properly. The Treasury does not want to give such bodies any freedom; it wants to grab the money and bring it back to the centre. That is clear to Liberal Democrat Members.

Jon Cruddas: Does the hon. Gentleman not concede that the fuller picture—we will presumably get it later this month, when we have the communities plan and the like—will not preclude the possibility of additionality? That is true even of debt-free councils, such as Barking and Dagenham, which enjoys a
 certain exceptionalism in this debate? Using that as an illustration winds things up while precluding the possibility of painting the fuller picture. There are opportunities as well as tensions for certain authorities.

Valerie Davey: The hon. Gentleman makes a fair point, and I was coming to it. The Government are expected to announce in the near future how they will spend all the money that was earmarked for housing in last July's spending review. That money will be welcome if, as we hope, the Government make the right decisions when allocating it. However, that makes our point stronger. If they are going to give money to authorities that need housing investment, especially for affordable and social housing, why do they need extra provisions to take money from councils?
 As we have heard, people are worried because councils in the south-east and London get huge receipts. They believe that that is unfair because councils in the north of England do not have the same advantage when investing in social housing. However, as the hon. Member for Runnymede and Weybridge said, councils in the south-east and London face huge costs in providing affordable housing and land is very expensive. The fact that their receipts are high mirrors and balances the fact that affordable housing provision is expensive. There is a self-regulating mechanism, but the Government do not want it to operate. They want to interfere, as is so often the case.

Jon Cruddas: To take that a bit further, the Government are presumably not ignorant of the pressures in the south-east, which relate primarily to key workers. We have seen press reports about their plans for regenerating the Thames gateway and their creative approach to housing in the area, which will involve strong proportionality in terms of social housing. That means that the issue is centre stage politically and economically. If the hon. Gentleman concedes that the proposals in the Bill will not preclude additionality from also being part of the fuller picture, is there not a case for saying that the issues are being wound up for what I acknowledge are politically expedient reasons? The proposals will allow a much more creative approach to confronting issues in the south-east, some of which are experienced by my community, the hon. Gentleman's and those of many of his colleagues.

Valerie Davey: I believe that the hon. Gentleman represents an area whose council will be hit by the measures. I understand that he is in a difficult position. I have already accepted that when the communities plan is announced there may be money for his and other areas—and, I hope, for my area, if we are lucky—but that is not the point. As the hon. Member for Runnymede and Weybridge said, many of the assets have been built up over many years through management of the money of tenants and local taxpayers and by debt-free authorities running their affairs prudently over a long period.
 It seems bizarre that the Government should implement the new system now. If their rhetoric 
 about freedom and flexibility is to reach its logical conclusion, such authorities should be encouraged. That brings me to a major point that the hon. Gentleman did not touch on: creation of incentives in the system. For this reason I am sceptical as to whether some of the Minister's figures will be realised. Will debt-free local authorities faced with this legislation encourage the sell-off of housing or housing land? No. They will not try to promote such selling as they might have done in the past because they will see that money going out of their area. 
 These provisions will create an incentive against good and efficient management of capital assets. We may see a paralysis in the management of capital assets by the local authorities most affected, and those whom the Government hope will receive money from the redistribution mechanism might not receive any, so both sides will lose. Rather than a win-win situation there will be a lose-lose situation. That cannot be a sensible way to proceed. 
 So whatever is written in the ''Focus'' leaflet that the Minister is going to wow us with, my friends who edited that leaflet will not necessarily have focused on the wider picture.

Philip Hammond: This is a pre-emptive rebuttal.

Valerie Davey: There are so many accusations of pre-emptive rebuttal. I am not sure whether I want to go down the pre-emptive route, as the Government seem to.
 On the incentive point, as the hon. Member for Runnymede and Weybridge and I start to analyse the mechanism the Government are promoting, it begins to fall apart, so it is not surprising that there has been great opposition to it outside the Committee. We have heard speeches in the Chamber opposing the proposals from Conservative and Liberal Democrat Members, and on Second Reading from the Labour Benches. The Local Government Association, with Labour, Conservative and Liberal Democrat councils, have opposed them.

Jon Cruddas: Will the hon. Gentleman give way on that point?

Valerie Davey: I will give way in a moment. The Capital Receipts Group has a number of debt-free councils opposed to the measures. In the Government's analysis of respondents to the draft Local Government Bill, 134 respondents wrote to the Government to say that it constituted a bad set of proposals. There is widespread opposition to them from people who have analysed them. They fear that it will not be a good move either for local government or for housing investment.

Jon Cruddas: Did the hon. Gentleman say that Labour within the LGA was opposed to the proposals? My understanding is that the Labour group did not vote on the issue because it was a redistributive issue, but the majority composed of Liberal Democrats and Conservatives produced the subsequent LGA position.

Valerie Davey: I cannot give the hon. Gentleman a full answer on that point—perhaps the hon. Member for
 Runnymede and Weybridge will do so—but it strikes me as a way of trying to evade responsibility. The Labour group on the LGA is very powerful and it could have changed the LGA's line if it had chosen to do so. Instead, it has allowed the LGA to be in outright opposition to this clause, and I think that it was right to do so.

Philip Hammond: The hon. Gentleman is absolutely right. It is worth placing on record that the LGA is a Labour-controlled organisation—the majority of its membership is Labour. The LGA has rejected clause 11.

Valerie Davey: I have to correct the hon. Gentleman on one point. I do not believe that there is a Labour majority on the LGA, although Labour clearly has more votes than any other party at the moment. I give way to the Minister, who may correct us with some exact information.

Nick Raynsford: I hope that I can cast a bit of light on this. I understand that, for obvious reasons, the LGA does not normally comment on matters that involve the distribution of resources between authorities. The Liberal Democrats and the Conservatives in the LGA supported the view that was carried, but the Labour group did not support it. That was an unfortunate example of a political division within the LGA on a matter of distribution. Such things would normally be avoided. That is the information that we have on what happened.

Valerie Davey: We are in danger of getting away from the point, and arguing over who voted for what and when. I understand that the Labour group in the LGA was not in outright opposition to this clause and that there was disagreement within the group.
 I want to deal with these amendments—in particular, with amendment No. 62. The hon. Member for Runnymede and Weybridge quoted from a brief from the Capital Receipts Group, which regards this as the key amendment. The amendment would delete clause 11(2)(b), thus removing the power of the Secretary of State to receive and then redistribute receipts. When one considers this matter and acknowledges, as the hon. Gentleman did, that it especially penalises debt-free authorities, one begins to see that the amounts involved are relatively small. For debt-free authorities, the amounts are extremely small in the context of overall housing budgets—especially when one considers the amount of money involved in the communities plan. It is therefore even more bizarre that the Government have decided to push this provision through, in the face of opposition both in Parliament and in the local government family. It is a sledgehammer to crack a nut, it creates disincentives, and it is a bad precedent for the Government's approach to low-debt and debt-free councils. 
 I hope that the Committee will support amendment No. 62, which I intend to press to a Division. The amendment would right the most odious part of this clause.

Philip Hammond: It is my amendment.

Valerie Davey: The hon. Gentleman says that it is his amendment, but I believe that my name is at the top of it. Look at the amendment paper.

Win Griffiths: For the sake of accuracy, amendment No. 62 is Mr. Davey's.

Valerie Davey: Thank you, Mr. Griffiths.
 There are many amendments to which I could speak in detail. Amendment No. 59 deals with a point of principle. My party is concerned by the whole idea of central Government interference in capital receipts. That has been a problem with previous Governments for many years. When Labour was in opposition, it talked of allowing councils to spend their receipts from council house sales, but in government, it has acted differently. The Government have put onerous rules and limitations on councils. We maintain our opposition to central Government interference. 
 Amendments Nos. 60, 61 and 51 delete various parts of the clause, all abhorrent to us. If the Minister accepts one or more of the amendments, the clause will be improved. 
 Amendment No. 63 closely resembles the Conservative amendment No. 3 in that it refers to the draft regulation and attempts to reduce the negative impact of the measures by limiting the percentage of capital receipts that will be paid into the pool and to the Secretary of State. I hope that that gives the Minister a way out. 
 It has been interesting watching the hints in the Minister's body language during this debate. I think that we might be about to witness a change of policy by the Government, or at least a finessing of existing policy—

Robert Syms: Refinement.

Valerie Davey: Indeed. I hope that that is the case, because if the Minister presses ahead with the clause as it stands, he will face opposition not only today in Committee and later on Report, but in the other place and throughout the country.

David Curry: I am loth to delay the revelation of the unfocused ''Focus'' leaflet that the Minister is apparently about to demonstrate to us. No one should be surprised by what the Government are doing, because it is entirely of a piece with what they have done until now. The local government settlement which has just been announced and which is to be debated by the House next Wednesday includes resource equalisation, which is a redistributive mechanism that has had an especially serious effect on my local authority. I see you nod sympathetically, Mr. Griffiths; no doubt you have been subject to the same problem. Now, we have before us another redistributive mechanism.
 The Government are determined to get hold of capital receipts and redirect them. We will not have to wait long to hear the reasons why. Before long, the Deputy Prime Minister will reveal something called the communities programme. The Government constantly use the word community—it is one of the latest buzzwords, although it usually obfuscates entirely the meaning of whatever it has been applied to. That programme is, in essence, the Government's housing 
 programme. It has two major legs, the first of which is the imposition of heavy housing targets in precisely the areas of greatest stress—the south-east, which the hon. Member for Kingston and Surbiton has been talking about, parts of the south-west, and the Stansted-Cambridge corridor. Lest there be any misunderstanding, I should say that my principal home is near Saffron Walden. I, therefore, have a substantial interest. We are to have not merely an airport with 93 extra runways imposed upon us, but God knows how many thousands of houses as well. If we carry on at that rate, the Minister will succeed in extending Hackney to the Isle of Ely, which he appears determined to do. The answer to the interesting question of how the Government are to deliver that policy is that they will do so by raiding local authorities' receipts to help their own housing building programme. 
 The other leg of the programme—this is where the hon. Member for Bolton, South-East (Dr. Iddon), whose performance has been similar to that of his local football team—

Brian Iddon: Wait until tonight.

David Curry: I shall not wait with bated breath. I am a long-standing Bolton supporter, but I have gladly taken the precaution of never watching the team in action ever since they lost—unfairly, I thought—to Blackpool in the 1953 cup final, which I watched on my Gran's television in Burton-on-Trent.
 The other leg of the Government's programme is demolishing houses in the north. That is desperately needed. There is not a single housing market in England, but several, and the major division is caused by the problems experienced in many of the northern cities. Everywhere, people are moving out of cities into surrounding areas, which creates a problem of financial resources being drained from some of the big metropolitan areas—hence the resource equalisation programme—and leaves large amounts of housing for which there is no market and which have to be demolished. 
 An interesting question is: where does one fit into the other? Is it intended to redistribute from what the explanatory notes call ''richer authorities''? I always try to avoid reading explanatory notes, because they are usually even more obscure than the text of the Bill itself. The notes refer to redistribution 
''from richer authorities to those in areas with a greater need for new housing investment'',
 but the areas with that greater need can themselves be very rich authorities.

Valerie Davey: Yes.

David Curry: The areas might include authorities in Surrey, as hon. Members on both Front Benches have said, or in the east of England. In terms of the geometry of council tax provision, the area surrounding the Stansted-Cambridge corridor must be fairly rich. It is, therefore, entirely possible that the
 redistribution will be from the rich to the rich, or from the rich to the richer.
 Another indicator suggests that redistribution might go another way. When the Deputy Prime Minister introduced his much-heralded but probably relatively small-scale changes to the right-to-buy programme, he identified areas of housing stress, a handful of which are strongly grouped in the London metropolitan area. Perhaps those are the areas of housing stress that he has in mind, but they do not necessarily coincide with the areas in which the Government are to impose major house building targets. 
 The Government are clearly not going to act against large-scale voluntary transfer receipts. It will be interesting to see how the LSVT programme, which was at the heart of the Government's housing Green Paper two or three years ago, will fit into the new programme to be announced by the Deputy Prime Minister. Will it still hold the centre ground? I hope that it will, because the right hon. Gentleman has nobly continued the policies on LSVT receipts that I inaugurated. However, the programme has seen some serious faltering. Birmingham, a hopelessly incompetent Labour authority, made a hopelessly incompetent fist of selling its transfer to local people—a recent report might well influence the way in which LSVTs are presented to the electorate in future—Sheffield has done a bunk, and several local authorities are thinking hard about whether they want to engage in LSVTs because of the problems of winning the acceptance of local tenants. If LSVT is sustained as one of the centrepieces of Government policy, it will be interesting to see how new life is breathed into it. So far, the arm's length companies have barely moved forward.

Patrick Hall: We can talk about the details for hours, but at the core is surely the overriding need to identify and meet housing needs. If the right hon. Gentleman agrees with that, will he explain the way in which the clause would preclude housing needs being met? As he says, there are needs in all sorts of areas, rich and poor, and there is nothing to prevent them from being met. Will he explain why that could not be done?

David Curry: My first observation is that this is a remarkable Committee because it contains five members of the Select Committee on Environment, Food and Rural Affairs who bring to the Bill a particular knowledge of rural affairs, which the hon. Gentleman exemplifies. Secondly, of course the purpose of the provision is to direct housing receipts into housing programmes that are not necessarily in the areas in which the receipts are generated—I give the Government credit for at least knowing what they think they are trying to do. Whether that is the right thing to do and whether there is a particular moral imperative attached to housing that other matters on which local authorities might want to spend money lack, those are separate questions.

Nick Raynsford: The right hon. Gentleman seemed to hesitate over whether the policy to redistribute receipts to areas of greater need is an appropriate one. As I understand it, that was the policy that he pursued
 when he was the Minister responsible for housing. Has he changed his mind?

David Curry: All Governments pursue redistributive policies—we all know that. The whole local government finance system is based on redistributive principles. The key is whether the formula identifies the needs, which is why we have a formula-driven system. The Government looked hard at the possibility of not having a formula-driven system and of using instead a system driven by performance and plan, but they drew back from that on the grounds that such a system might not meet needs. The question is where does the balance of reasonableness lie?
 My point is that it is entirely possible that there will be needs that a local authority wants to meet—and which the Government have imposed a duty on it to meet—which are just as much of an imperative as housing. For example, the Environment, Food and Rural Affairs Committee is currently considering the problem of waste and its handling. There is no doubt that the Government will catastrophically miss their waste targets. So, no doubt new obligations will soon be imposed on local authorities, for the collection, sifting, sorting and recycling of waste. That will be an imperative. It would be a perfectly legitimate use for local authority capital receipts, particularly if we could get away from the absurd system in which the collection and disposal of waste are in the hands of different local authorities.

Andrew Turner: Does my right hon. Friend agree that another example would be the provision of residential care in nursing homes for elderly people? There is great demand from the Government to reduce bed blocking in hospitals.

David Curry: I agree. The Government's curious approach of taking £100 million from the NHS to give to local authorities to pay in fines to the NHS is the nearest thing to a tautology erected into a political mechanism that I have ever come across. It is absurd thinking.
 We have discussed local authorities' ability to raise capital receipts—provided they can finance them, as the Minister said. I happened to be at North Yorkshire county council offices on Friday. I said to the treasurer, in my innocent way, ''You'll be looking forward to using those freedoms, won't you?'' He said, ''You must be joking. There's no way on earth that we could afford to finance any additional borrowing. We don't have the resources.'' That is partly because resource equalisation has spun some of them away from the local authority. That would be a legitimate purpose. Another would be assisting with a school refurbishment or a rebuilding programme. Since we are in the age of ''education, education, education'', is that a moral imperative less important than housing? There is, in the end, a perfectly good case for telling local authorities that they are elected, they are accountable and they can take decisions about the receipts. 
 I am interested in what the Minister expects with regard to right-to-buy receipts. My understanding is that they run to something between £1.4 billion and £1.6 billion a year. The current year—the one that is 
 coming to a close—has been quite a rich one, perhaps heading for a figure of £1.6 billion. No doubt that is because the threat by the Deputy Prime Minister to restrict sales has had what one might call the Lawson effect, of accelerating them. I hope that the gap between the announcement and its implementation will produce a monsoon of new applications for the right to buy. It would serve the Deputy Prime Minister right. Still, I should be interested to know the Minister's estimates, whether the changes made by the Deputy Prime Minister will influence them and whether the Deputy Prime Minister intends to extend the areas of what he calls housing stress. In some places, such as Leeds, the local authorities believe that there was a surge in applications in the expectation of housing stress. 
 This is the sort of debate in which one rather wishes that the Minister could have replied before anyone asked a question, because what he says is undoubtedly likely to provoke even more questions. I have given my preliminary thoughts and will be interested to hear the Minister's response.

Philip Hammond: On a point of order, Mr. Griffiths. There are now seven minutes left until the scheduled end of the sitting. We are in the middle of consideration of clause 11. The Programming Sub-Committee resolution has a knife in the Bill at the end of Thursday's proceedings, after clause 73. On the face of it, that makes it look as if we shall not debate the important business improvement district and non-domestic rates provisions.

Nick Raynsford: We could sit a little later.

Philip Hammond: The Minister suggests, from a sedentary position, that we stay later. In view of the new sitting hours of the House, the difficulty that some hon. Members will have is that it will be impossible to table amendments for Thursday if the Committee sits until the House rises.
 I seek your guidance, Mr. Griffiths, on how a member of the Committee can propose the reconvening of the Programming Sub-Committee, with a view, perhaps, to repositioning the knife that is due to fall at 5 pm on Thursday. Perhaps a later sitting could be allowed on Thursday, to ensure that the important matters of BIDs and non-domestic rates can be debated.

Win Griffiths: My own feeling is that it is for the members of the Committee who normally discuss these matters to come to an arrangement for the rest of the week.

Philip Hammond: Further to that, Mr. Griffiths, is there a formal mechanism by which a member of the Committee can propose that the Programming Committee be reconvened?

Win Griffiths: In a sense, the hon. Gentleman has made that view known. People appreciate the difficulties that we are running into and I am sure, from the body language of the Government Whip, that he is willing to confer while we continue with the proceedings. There is no need to worry about arranging something.

Sue Doughty: We touched on some reasons why the clause will cause local authorities problems. I get the impression that the Government do not accept the fact that, for years, local authorities have subsidised housing and received negative housing subsidies. In order to maintain the housing stock, they have had to draw upon council taxes and rents. We are considering assets that have been substantially maintained by the income derived from tenants, and are discussing the worst sort of redistributive taxation: income derived from the poorer members of society is to be redistributed to pay for other people who are also less affluent.
 We seem to have a misconception about the need in more affluent areas. It seems to be thought that because some people in a local area are rich, a council is rich, therefore all the people who live there are affluent. Yet the housing need is substantial; the national average for vacant dwellings is 2.9 per cent. The hon. Member for Bolton, South-East will be interested to know that in the north-west it is 4.7 per cent., while in the south-east it is only 1.3 per cent. 
 We have talked about key workers. The hon. Member for Runnymede and Weybridge mentioned teachers, the police and other workers whom we cannot keep in the south-east because they do not get houses. When we go down the income groups, we see the additional problem that essential workers, such as bus drivers, trainee nurses and postmen, are not even classified as key workers and do not qualify for any schemes. There is no logic in saying that an authority's money that might provide housing for postmen and bus drivers should go somewhere else to pay for the workers in that area. 
 I am concerned about what happens when a local authority does not spend its housing budget in a particular year, not because it has no intention of doing so but because it is waiting for a piece of land to come up. Because of the shortage of building land, councils have to find not only the money to build on the land but the land itself. Whether they are investing through housing associations or directly in housing, they can experience delays. Can the Minister assure us that councils that have prepared a strategic housing plan are not penalised if they are unable to proceed in a given year due to a shortage of land? 
 The Minister keeps trying to suggest to us that it is not all that bad, so I hope that he is going to say something helpful about debt-free local authorities. Some councils that are unable to build houses tell tenants or would-be tenants that they can direct them to empty homes in the north-west or in Coventry. Sadly, life is not like that. We sometimes have to bus people from the other side of London to clean our hospitals, but a hospital cleaner working at the Royal Surrey county hospital is not much use to us living in a house in Coventry.

David Borrow: Does the hon. Lady agree that part of the problem in meeting housing need, particularly in the south-east, arises from the planning regime and the ''not in my back yard'' attitude of some local authorities that makes them resistant to freeing up land for new housing? As long as that attitude persists, the price of existing
 housing is pushed up, causing considerable problems for the people the hon. Lady is talking about.

Sue Doughty: I would be a little happier if I could say that that was the problem, but clearly it is not. There have always been problems about housing regimes and whether green belts should be preserved, but the economics of building houses on the commercial market is such that it is difficult to obtain planning gains unless a reasonable number of executive houses are built. Guildford has struggled for many years to get a planning regime that would allow it to build the sort of houses that we badly need. The hon. Gentleman says ''NIMBY'', but we are trying to build those houses. The problem is liberating the money.

Philip Hammond: I think that the hon. Member for South Ribble (Mr. Borrow) is trying to get at the suggestion that some authorities are resistant to the housing numbers that the Government seek to impose on them. I have a vital interest as another Surrey Member and, for clarity, I ask the hon. Lady to understand her position and her party's position in relation to the proposed housing allocations for Surrey.

Sue Doughty: We are moving away from the subject under discussion. My party wants to build affordable housing, as well as social housing through housing associations, through councils wherever the opportunity presents itself. Like many councils, Guildford is not particularly enamoured with taking up further land for executive housing.
 The Bill is about building houses for those in greatest need, not about building houses for executives. That is where the problem arises. Before my council in Guildford went debt-free, the chief executive would come to me and say, ''We have all this money in the bank and we cannot spend it'', which is why it went debt-free in the first place. It was not a policy of not wanting to spend it, but of being unable to spend it. 
 If the Minister is giving us these areas of hope, does that mean that the Government will look as favourably on local authorities in affluent areas as on those in less affluent areas?

Paul Goodman: I have a particular inquiry to put to the Minister, which he will perhaps allow me to put in this way. The Minister's leitmotiv has been that one of the main aims of the Bill is to decentralise—to allow local councils more flexibility, more freedom and more discretion. As my hon. Friend the Member for Runnymede and Weybridge has pointed out from the Front Bench and the hon. Member for Kingston and Surbiton, the Liberal Democrat spokesman, has also pointed out, it is impossible to reconcile that objective with clause 11, because the clause appears to represent an attempt to transfer money from well-run councils in the south-east to other councils that are less well run. I note in passing, as my hon. Friend pointed out, that the clause contains no reference to pooling. Subsection (2)(b), a key part of the clause, simply says baldly that provision can be made
''requiring an amount equal to the whole or any part of a capital receipt to be paid to the Secretary of State.''
 What is truly significant about the Minister's proposal is that it is clear that many local authorities are willing to meet him more than halfway. A few moments ago, my right hon. Friend the Member for Skipton and Ripon (Mr. Curry) made a valid and powerful point about the obligations that local authorities necessarily have to meet. He argued strongly that housing is only one of their obligations. 
 The submissions that members of the Committee will have received, and the Minister will have read, reveal that some councils are willing to be bound. For example, the Capital Receipts Group, to which the hon. Member for Guildford has alluded, said that 
''Most members of the group''—
 of which Wycombe district council is one— 
''already ring-fence their housing capital receipts for housing investment and would be prepared to accept a statutory requirement for them to do so''.
 The Minister will presumably be aware that Wycombe district council has stated: 
''We therefore propose an alternative system where authorities should retain their capital receipts and be given control of their own resources, based on a commitment to deliver.''
 It is not as though local authorities, including mine in Wycombe, are not willing to meet him halfway, and I should like him to make it clear to the Committee whether he is willing to meet them. 
 What possible sense can there be in a proposal that, as far as I can see, would transfer money from, for example, my area in High Wycombe, where it is badly needed for housing for public sector workers on low wages or for poorer people, many of whom are members of particularly poor ethnic-minority groups? I want the Minister to explain why money should be transferred from those relatively deprived groups of people, who are poor albeit that they live in better-off areas, to other groups of people elsewhere in the country, who may either be equally poor, in which case I do not see the element of social justice, or be richer than them. 
 The point has been well made in Committee by the hon. Members for Guildford and for Dagenham (Jon Cruddas) that not everyone in a relatively well-off area is well off. There are poor people in well-off areas who will be hit particularly hard by the draconian clause. I hope that the Minister can satisfy my hon. Friends and me on the matter.

Robert Syms: Not since Henry VIII and the dissolution of the monasteries have we seen such a grab for land. There is genuine concern about the proposal among a range of local authorities, that have managed their capital assets in what they thought was the best way they could. I share the concerns of my hon. Friends and the Liberal Democrats that the change will lead to worse husbanding of resources.
 I can understand the Government's concern to switch resources around, but I am extremely sceptical about the policy's impact. Local people should be left with maximum flexibility, so I am concerned by the clause. I look forward to the Minister justifying the grab for cash.

Nick Raynsford: The debate has been long and florid, and it has ranged widely. We have had some extreme hyperbole: a moment ago, the hon. Member for Poole said that ''never since Henry VIII has there been such a land grab''. I will bring us back to reality by looking closely at the clause, in which there are two key principles. First, we need to meet housing needs more effectively. There is general agreement that a lot more should be done to tackle housing needs throughout the country, particularly in the areas of greatest pressure. We need to ensure that people on low incomes who would otherwise find it hard to get affordable accommodation are helped to secure better housing. That must be an objective.
 The second objective relates to the pooling of resources drawn from the disposal of capital assets to ensure that those are used to best effect to help boost our housing programme. There is some debate about that but the principle of having some degree of pooling has been there for a long time. It was very much part of the policy pursued when the right hon. Member for Skipton and Ripon was Housing Minister in the mid 1990s. A set-aside provision existed then and it remains in place today. For the vast majority of local authorities there will be no significant change. In place of set-aside there will be pooling, but the percentages that we propose for pooling will be exactly the same as the current set-aside percentages. I will come to the question of debt-free authorities in a moment. We are conscious of the strength of feeling. I hope that my proposals will help to provide a sensible way forward that people will agree is a sound and reasonable compromise. 
 Before I do that I shall look briefly at the amendments. Apart from amendment No. 25, the amendments are primarily concerned with limiting the capital receipts that may be subject to pooling or removing the power to pool altogether, which would be a fundamental and radical change that would certainly frustrate any attempt to ensure that resources were directed towards areas of greatest need.

Philip Hammond: Just so that the Minister does not inadvertently mislead the Committee, may I point out that not all the amendments aim to limit the capital receipts subject to pooling. Some of them are directed towards limiting the amount of the pooling levy that can be imposed.

Nick Raynsford: No. I accept that. I was trying to do this as quickly as possible as time is short.
 The combined effect of amendments Nos. 62, 66, 67, 69 and 70 would be that regulations under clause 11 could not require authorities to pay any amounts to the Secretary of State. They could make provision only about the use by a local authority of a capital receipt obtained by that authority, such use being limited to the purposes cited in subsection (2)(a). Amendments Nos. 59 and 60 appear to go much further and would mean that the Secretary of State would have no power to make regulations with regard to capital receipts. Amendments Nos. 61 and 62 would allow him that power but would respectively either allow him to make no provision about the uses to which the receipts could be put or not allow him to require them to be pooled. 
 Amendment No. 63 would appear to seek to restrict the Secretary of State's powers in the regulations under the clause so that he could specify only that a small proportion of capital receipts would be subject to pooling: 25 per cent. in the case of a dwelling and 15 per cent. in the case of other housing assets. We have no idea where the figures came from. Perhaps the people responsible for the amendment might explain why those are regarded as suitable. Amendment No. 3 would have a similar effect. It would limit the amount that could be subject to pooling to 20 per cent. Amendments Nos. 39 and 40 are aimed at allowing the regulations to specify that up to 60 per cent. of a capital receipt shall be used only to meet capital expenditure in connection with a local authority's housing functions under part II of the Housing Act 1985. Part II deals with the provision of housing by a local authority and amounts so used would not be available for pooling. 
 Finally, amendment No. 41 would omit subsection (5) so the Secretary of State could not set off any amount payable under the clause against any amount that he is liable to pay to the authority. This is not a Machiavellian attempt to apply set-off—an abuse in the construction industry with which the hon. Member for Poole will be familiar. I certainly was when I was Construction Minister. It is simply an administrative convenience to ensure that we do not have cheques flying in two different directions, one from the local authority to the Government and another from the Government to the local authority. It is administratively sensible. There is no evil intent, despite the suspicions that lurk on the Opposition Benches.

Philip Hammond: The Minister asked where the percentage figures come from. I can only speak for amendment No. 3, but the 20 per cent. in that amendment is designed to mirror the levy on large-scale voluntary transfers, which I understand is 20 per cent.

Nick Raynsford: I can only say that I was raising the question about the figures of 25 per cent. and the 15 per cent., which seem entirely arbitrary and are probably off the top of the Liberal Democrat heads.

Valerie Davey: Could the Minister, in return, explain why he thinks 75 per cent. and 50 per cent. make any sense, other than that they come from the previous legislation?

Nick Raynsford: The hon. Gentleman has just made the point—those are the existing arrangements. As I said earlier, there is no change whatever for the vast majority of councils. Despite the huge hyperbole, the great exaggerations, the forecasts of doom and disaster, there is no effective change from the current arrangements for the vast majority of local authorities except for the 30-odd debt-free authorities. It is pooling rather than set-aside: it is a different terminology, but the effect is the same. That is why we opted for our figures—a rather better and more plausible reason than the Liberal Democrats have.
 I come now to the effect of the amendments. They have a common theme: they would result in pooling not operating, as we believe it must if all authorities are to have the resources that they need to meet pressing national housing priorities. Some of the amendments would also have serious implications for the framework within which authorities manage their financial affairs. For example, the Secretary of State would not be able to specify that capital receipts could not be used to meet revenue expenditure, thereby allowing leakage to the subsidising of council tax rather than the money being invested in important new housing provision. 
 It must be right for the proceeds from the sale of council housing to be available for use in areas of greatest need. That is exactly what the current arrangements do, and it is exactly what was done under the capital receipts initiative that we announced in 1997. Indeed, the hon. Member for Runnymede and Weybridge was a member of the Committee that considered those arrangements early in that Parliament. That initiative distributed some £5 billion of accumulated receipts in a proportionate arrangement, with two thirds being allocated in relation to need and one third in relation to where the receipts originated, which is not that different from the figures under the proposed set-aside regime. The principle of redistribution is important, and without it the vast majority of authorities with urgent housing need would be left without sufficient resources. Most authorities understand that and the part that pooling plays. 
 It has been suggested that debt-free authorities should nevertheless be able to keep some or even all of their receipts to meet their spending needs, but we do not propose pooling 100 per cent. of receipts. Authorities will still be able to keep 25 per cent. of receipts from right-to-buy sales and 50 per cent. of other receipts. Pooling will not apply—there has been confusion about this—to any future LSVT receipts. 
 As the draft regulations make it clear, we intend to allow all authorities to retain other non right-to-buy receipts if they are used to provide affordable housing or to support regeneration schemes under the in-and-out provisions. Again, there is no change. However, some authorities are rich in receipts, primarily from right-to-buy sales that occur not because of good management or good asset management but simply because people choose to buy housing in the area, which often is to do with other factors. I do not accept that those authorities should routinely be able to spend significantly more than other authorities simply because they are debt-free. That seems to be perverse and unfair, and I am sure that my hon. Friends will agree. 
 Liberal Democrat Members will have noticed that I have been clutching a piece of paper. It is a Liberal Democrat Focus leaflet. I do not have much time for them, such is the sad plight of the party in my constituency, I am pleased to say that I rarely see them on my patch. This leaflet comes from Mole Valley. It gives an interesting insight into what Liberal Democrats are saying there and why the policy that their parliamentary representatives are pursuing in the 
 Committee would frustrate what they are trying to achieve. 
 Mole Valley Liberal Democrats say that the provision of affordable housing is currently the most urgent problem facing Dorking. I am sure that they are right; I have no reason to doubt it. It then says that, in the face of that crisis, Mole Valley Conservative councillors plundered £4 million from the funds that the council raised from the sale of council housing, which the council has carefully protected in order to invest in affordable homes. What do the Liberal Democrats say? They say that instead of diverting the money, councils should invest it directly in more effective housing programmes. We agree. Why, then, do they oppose provisions that will ensure that capital receipts are not used for other purposes but are applied for housing investment?

Valerie Davey: For the Minister for Local Government to denigrate local democracy is a real shame.

Brian Iddon: I thank my right hon. Friend the Minister for that information. I suspect that it is not an isolated example. Have the Government monitored the value of capital receipts that were received in that way but have leaked out of the housing sector?

Nick Raynsford: I gave some figures on Second Reading and could go into that in some detail now. However, as we are very short of time, I ask my hon. Friend to bear with me and allow me to provide more detailed figures in due course.
 The comments of the hon. Member for Kingston and Surbiton were interesting. I made no criticism whatsoever of Liberal Democrat councillors—in fact, I agreed with them. However, I did criticise the Liberal Democrat party for opposing policies that would achieve the effect that their local councillors in Mole Valley want. It is typical of the Liberal Democrat party to play things both ways. They say one thing to one group of people but something else to a different audience. 
 We want effective local democracy but we also want effective housing provision. That involves difficult choices, which we are not frightened to make. We do not say one thing to one group of people and another thing to another group.

Valerie Davey: The Minister is skating on very thin ice. There is a distinction between this place or Whitehall deciding all housing policy for the whole of the country, and elected representatives having debates in their own area and being held to account by the people who elected them. The latter is the position of my party, but the Government's position is to centralise everything and denigrate and undermine local democracy.

Nick Raynsford: The hon. Gentleman is getting rather excited. That is not the case at all. I am simply saying that we agree with his party's local councillors in Mole Valley. If he agreed with them, he would support measures to ensure that capital receipts were not squandered on other things.

Philip Hammond: Will the Minister give way?

Nick Raynsford: No, we need to make some progress.
 The amendments could reduce the amount available for redistribution by a considerable amount. In earlier exchanges, I explained that the overall effect would be to reduce the amount available for redistribution by more than £1 billion a year. Even the amendments that seek to limit the amounts that can be pooled would result in a reduction of more than £800 million a year, and just exempting debt-free authorities would still cost some £120 million every year. Money from the sale of assets that taxpayers have funded for years, in one way or another, would not be available to meet the most pressing national housing needs.

Philip Hammond: In his exchange with the hon. Member for Kingston and Surbiton, the Minister sought to make a case for ring-fencing receipts for housing use. He singularly failed to make a case for pooling them. Is he indicating that he is moving towards a same authority ring-fencing solution as a compromise?

Nick Raynsford: I urge the hon. Gentleman to be patient and bear with me. He may hear something that he will enjoy. Perhaps he will not enjoy it, but he may be interested, in any case.
 It is of paramount importance that in the longer term all authorities should have access to maximum funding to meet national housing priorities, such as affordable housing and decent homes. The Government provide significant additional resources to help achieve that. Since 1997, the total amount provided to local authorities in England has increased by two and a half times, from just under £1 billion to £2.5 billion—so much for the argument about no additional funds and all the talk about confiscation. It is a rapidly expanding programme, and we are ensuring that more money is used to meet housing needs. 
 The arrangements proposed in clause 11 and the draft regulations are central to our efforts to achieve the necessary investment and are fair to all authorities. The amendments would jeopardise the long-term needs of many for the benefit of the few, whereas we propose a system that is fair to all. The areas that generate the most receipts will retain significant amounts to use as they see fit, and all authorities will be eligible to benefit from the resources available nationally for their needs. This will not happen without clause 11. We understand that some authorities may need time to adjust to the new circumstances under which national resources are shared equitably among all authorities. The Government have, therefore, decided that there should be transitional arrangements for debt-free authorities with housing stock; by that I mean those that are debt-free when the present capital finance regime comes to an end. Those are the authorities most affected by pooling since they will in future be contributing to the national funding of housing priorities, mainly by way of right to buy receipts. They are the only authorities to which the provisions make a material difference. 
 We propose to introduce special arrangements in the housing investment programme so that a proportion of the total resources expected to be 
 pooled by those authorities will, for a transitional period, be earmarked for them as part of the annual capital round. Ring-fencing is a difficult issue here. The argument is that all the housing cases suggest that those amounts should be made available, provided that they are used for housing; in other words, ring-fenced. However, the Government seek to reduce ring-fencing. Looking at the matter objectively, I have concluded that as this is proposed as a transitional arrangement to be phased out over time, ring-fencing would be acceptable as it will not be permanent. That is consistent with our approach to ring-fencing generally. 
 The transitional arrangement will enable authorities to earmark sums annually, provided that they are used for housing. Those sums will be in addition to other resources that they may be allocated. The proportion of the earmarked funds will reduce each year from 75 per cent. in year one to 50 per cent. in year two to 25 per cent. in year three; transitional measures will cease from the fourth year. All pooled resources will be available for distribution to all authorities. The earmarked amounts will be allocated to debt-free authorities when their circumstances have been assessed. We will provide further details when the communities plan has been published. I hope that hon. Members will see that we genuinely seek a compromise that reconciles conflicting aspirations and needs while remaining true to the principles that there must be a focus on meeting housing needs and that a pooling system is in place to ensure that resources from housing can be used to best effect to support housing.

David Curry: Will the Minister treat debt-free authorities collectively so that the terms will apply to them collectively or will the arrangements apply to each authority individually? It is not clear.

Nick Raynsford: The aim is that the arrangements will apply to each authority individually.
 Amendment No. 25 is a technical amendment that clarifies the extent of clause 11. It seeks to put beyond doubt that any capital receipt that a local authority derives from the disposal of housing land, including the disposal of it by an interest in that land, may be subject to the pooling requirement provided in clause 11(2)(b). It is consistent with the wording of clause 9(1) and will put beyond doubt, for example, that the disposal by an authority of its mortgage portfolio for housing revenue account properties is subject to pooling. That replicates current arrangements under which 50 per cent. of the capital receipts from the sale of mortgage portfolios is set aside as provision for credit liabilities. Ensuring that a proportion of the capital receipts arising from the sale of mortgage portfolios is pooled will guarantee consistency with the treatment of other right-to-buy receipts. I hope that hon. Members will accept that the amendments are not appropriate and should be withdrawn, apart from Government amendment No. 25, which I commend to the Committee.

Phil Woolas: Is it possible under Standing Orders to hold a meeting of the programmed Sub-Committee at the end of this meeting?

Win Griffiths: Yes, provided that we have a quorum there is no problem in holding such a meeting. Members are formally warned about that now.
 Further consideration adjourned.—[Mr. Woolas.] 
 Adjourned accordingly at twenty-nine minutes past Five o'clock till Thursday 30 January at five minutes to Nine o'clock.